Energy Strategy 2050 – from coal, oil and gas
Energy Strategy 2050 – from coal, oil and gas
Energy Strategy 2050 – from coal, oil and gas
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energy strategy <strong>2050</strong><br />
<strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy<br />
the danish government<br />
February 2011
Introduction: From <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy<br />
2<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.
Content<br />
Preface ......................................................................... 4<br />
Introduction:<br />
From <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy ......................... 6<br />
Chapter 1<br />
New challenges <strong>and</strong> new opportunities<br />
for energy policy ........................................................ 10<br />
Chapter 2<br />
A flexible strategy ...................................................... 16<br />
Chapter 3<br />
Initiatives in the strategy .............................................. 28<br />
Chapter 4<br />
On the way towards fossil fuel independence by <strong>2050</strong><br />
<strong>–</strong> effects <strong>and</strong> benefits of the government’s initiatives ........ 46<br />
Chapter 5<br />
A fully financed transition ........................................... 56<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
3
Preface<br />
4<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
The 20th century was largely driven by access<br />
to cheap <strong>and</strong> plentiful <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong>.<br />
However, in the 21st century we will have to<br />
find other means of satisfying our energy needs
A new era for energy policy<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> is a huge step towards realising<br />
the Danish government’s vision of becoming independent<br />
of <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong>.<br />
In 2010 the Danish Commission on Climate Change<br />
Policy concluded that transition to a fossil fuel independent<br />
society is a real possibility. <strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong><br />
builds on this work.<br />
This strategy is the first of its kind; in Denmark <strong>and</strong> in the<br />
rest of the world. The strategy outlines the energy policy<br />
instruments to transform Denmark into a green sustainable<br />
society with stable energy supply. The strategy is<br />
also fully financed, taking full account of Danish competitiveness.<br />
The strategy presents a wide spectrum of new energy<br />
policy initiatives. These initiatives will already in the short<br />
term considerably reduce fossil fuel dependence. Just in<br />
the period up to 2020, the strategy will reduce the use of<br />
fossil fuels in the energy sector by 33% compared with<br />
2009. In addition, the strategy will increase the share<br />
of renewable energy to 33% by 2020 <strong>and</strong> it will reduce<br />
primary energy consumption by 6% by 2020 compared<br />
with 2006 due to a strong focus on energy efficiency<br />
improvements.<br />
The government’s goal of making Denmark independent<br />
of fossil fuels by <strong>2050</strong> is based on the realization that<br />
the world is facing a new era for energy policy. The 20th<br />
century was largely driven by access to cheap <strong>and</strong> plentiful<br />
<strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong>. In the 21st century we will have to<br />
find other means of satisfying our energy needs.<br />
Within the next 25 years, the world’s total energy consumption<br />
is expected to increase by one-third. At global<br />
level, the increasing pressure on fossil energy resources<br />
has contributed to an energy race, in which the influence<br />
<strong>and</strong> growth opportunities of regions largely depend on<br />
their access to fossil fuels, with increasing prices <strong>and</strong><br />
uncertainty as a consequence.<br />
The Danish government does not wish to be part of this<br />
race. The government’s resolve is only strengthened by<br />
the fact that much of the world’s fossil energy reserves<br />
are concentrated in just a few, often politically unstable,<br />
countries. This combination can have negative con-<br />
sequences, with increased dependence on producing<br />
countries. Therefore, the transition to green energy is<br />
also a foreign policy requirement.<br />
In addition to addressing the challenges in a new era of<br />
energy policy, <strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> is also Denmark’s<br />
contribution to curbing global warming. The international<br />
community has committed to drastic reductions<br />
in greenhouse <strong>gas</strong> emissions at international climate<br />
change conferences in Copenhagen <strong>and</strong> Cancún. The<br />
world - <strong>and</strong> Denmark - can only do this by becoming<br />
less dependent on fossil fuels.<br />
Finally, the strategy will bolster Danish growth <strong>and</strong><br />
wealth. The transition will strengthen companies’ opportunities<br />
for innovation <strong>and</strong> demonstration of new green<br />
solutions. This will improve the opportunities of Danish<br />
companies in a rapidly growing global market for energy<br />
solutions.<br />
The transition to fossil fuel independence is a huge<br />
task that will fundamentally change Danish society.<br />
Fortunately, Denmark can draw on many years of solid<br />
experience. Denmark has a successful track record of<br />
securing economic growth without energy consumption<br />
growth. Since 1980, the Danish economy has grown by<br />
78%, while energy consumption has remained more or<br />
less constant, <strong>and</strong> greenhouse <strong>gas</strong> emissions have been<br />
reduced.<br />
It is important to emphasise that the Danish transition<br />
cannot be realised in isolation, independent of the world<br />
around us. Denmark is not an isl<strong>and</strong> <strong>–</strong> not geographically<br />
<strong>and</strong> not in the field of energy policy. We need other<br />
countries <strong>–</strong> <strong>and</strong> our European neighbours in particular<br />
<strong>–</strong> to move in the same direction. Therefore, the Danish<br />
government will continue to work for ambitious global<br />
reduction targets. The government will strive for an EU<br />
commitment of 30% carbon emission reductions by<br />
2020. Furthermore, the Danish government is committed<br />
to working against green protectionism.<br />
The Danish government’s strategy ensures responsible<br />
transition to a new era of energy policy. A transition that<br />
safeguards affordable, stable energy supply, is gentle on<br />
the public purse, supports the growth potential of Danish<br />
companies, <strong>and</strong> protects the leeway in our foreign policy.<br />
The Danish government, February 2011<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
5
Introduction: From <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy<br />
Introduction:<br />
From <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy<br />
6<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> fulfils the government’s pledge as set<br />
forth in its work plan “Denmark 2020”, that it would pre-<br />
sent a target for when Denmark is to become independent<br />
of fossil fuels, as well as a strategy to meet this target
The goal of the Danish government is independence<br />
<strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> by <strong>2050</strong>. With this move to fossil<br />
fuel independence, Denmark will also satisfy two other<br />
important ambitions:<br />
• Denmark will maintain a high security of supply <strong>and</strong><br />
ensure stable, affordable energy supply. Security<br />
of supply will be a key challenge in a future, where<br />
the global dem<strong>and</strong> for energy is growing in line with<br />
population growth <strong>and</strong> economic growth, <strong>and</strong> where<br />
the remaining <strong>oil</strong> <strong>and</strong> <strong>gas</strong> resources will be concentrated<br />
in few, <strong>and</strong> often politically unstable, countries.<br />
• Denmark will contribute to limiting global climate<br />
change as agreed in Copenhagen 2009 <strong>and</strong> in<br />
Cancún 2010. Therefore, Denmark must contribute<br />
to meeting the EU objective to reduce greenhouse<br />
<strong>gas</strong> emissions in <strong>2050</strong> by 80-95% compared with<br />
1990 levels. This requires the transition to an economy<br />
with low greenhouse <strong>gas</strong> emissions.<br />
Denmark will maintain a high<br />
level of energy security of supply<br />
Figure 0.1. Effects of independence of fossil fuel<br />
Independence of fossil fuel<br />
In addition, the government’s strategy for fossil fuel independence<br />
will help secure <strong>and</strong> develop the strength of<br />
Danish companies within the fields of new green energy,<br />
climate <strong>and</strong> environmental technology. A stronger coupling<br />
between innovation, production <strong>and</strong> deployment<br />
will improve companies’ opportunities to take advantage<br />
of the increasing global dem<strong>and</strong> for green technologies<br />
in order to create growth <strong>and</strong> employment.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> fulfils the government’s pledge<br />
as set forth in its work plan “Denmark 2020”, that it<br />
would present a target for when Denmark is to become<br />
independent of fossil fuels, as well as a strategy to meet<br />
this target.<br />
At the same time, <strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> supports <strong>and</strong><br />
meets a number of Denmark’s ambitious targets in the<br />
climate <strong>and</strong> energy area in the government’s work plan,<br />
in the national energy agreement for 2008-2011, <strong>and</strong> as<br />
a consequence of the EU climate <strong>and</strong> energy package<br />
<strong>from</strong> 2008.<br />
Denmark will contribute its<br />
share to curbing global warming<br />
Demark will harvest opportunities for green growth <strong>and</strong> employment<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
7
Introduction: From <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy<br />
Targets in the government’s work plan<br />
• Denmark is to be a green <strong>and</strong> sustainable society<br />
• Denmark is to be among the three countries in the<br />
world to raise its renewable energy share most by<br />
2020<br />
• Denmark is to be among the three most energyefficient<br />
countries in the OECD by 2020.<br />
Danish targets arising <strong>from</strong> the EU climate <strong>and</strong><br />
energy package<br />
• The share of renewable energy will be increased to<br />
30% of final energy consumption by 2020 as part<br />
of an overall EU target of 20% renewable energy by<br />
2020.<br />
• The share of renewable energy in the transport sector<br />
will be 10% by 2020<br />
Box 0.1 The government’s targets underpinned by <strong>Energy</strong><br />
<strong>Strategy</strong> <strong>2050</strong><br />
Fossil fuels are cheaper than renewables. This will probably<br />
hold true for some time yet. This implies economic<br />
costs in the transition to fossil fuel independence <strong>and</strong> will<br />
ultimately have to be paid by the Danish consumers of<br />
energy; in other words by companies <strong>and</strong> private households.<br />
The government therefore believes it is vital that<br />
the transition takes place as cost-effectively as possible,<br />
with concern for the long-term viability of public finances,<br />
the competitiveness of companies <strong>and</strong> ultimately for<br />
Danish jobs.<br />
8<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
• Emissions in the non-ETS sectors will be reduced<br />
gradually in 2013-2020 <strong>and</strong> by 20% by 2020 relative<br />
to 2005 as part of an overall EU target to reduce<br />
emissions by 20% by 2020 relative to 1990.<br />
Targets in the national energy agreement for the<br />
period 2008-2011<br />
• In 2020, primary energy consumption will be 4% less<br />
than in 2006.<br />
Danish objectives for EU climate <strong>and</strong> energy<br />
policy<br />
• The government is working for an EU commitment<br />
to reduce overall emissions of greenhouse <strong>gas</strong>es by<br />
30% by 2020 relative to the 1990 level.<br />
On the one h<strong>and</strong>, measures should not be forced<br />
through with an unnecessarily high expenditure right<br />
now. On the other h<strong>and</strong>, the benefits of lower greenhouse<br />
<strong>gas</strong> emissions, lower energy consumption, more<br />
stable fuel costs <strong>and</strong> less dependence on fossil fuels,<br />
also have value in the years up to <strong>2050</strong>.
What is implied by independence<br />
of fossil fuel?<br />
An economically responsible transition to<br />
fossil fuel independence is important to the<br />
Danish government<br />
Obviously, any goal reaching almost 40 years into the<br />
future is associated with uncertainties. Therefore, the<br />
government’s goal of fossil fuel independence includes<br />
some flexibility.<br />
In summary, the government’s goal is a greenhouse <strong>gas</strong><br />
neutral energy sector, which utilises 100% renewables,<br />
or a combination of renewables <strong>and</strong> <strong>coal</strong>/biomass with<br />
CCS (carbon capture <strong>and</strong> storage). The goal also entails<br />
the continued exchange of energy products with other<br />
countries, so that Denmark continues to exploit all the<br />
Box 2.0 The goal of fossil fuel independence<br />
Principles for the transition<br />
to independence<br />
An economically responsible transition to fossil fuel<br />
independence is important to the Danish government.<br />
This means that the transition will meet the following<br />
principles:<br />
A cost effective transition<br />
The transition will be cost effective, with initiatives providing<br />
maximum security of supply <strong>and</strong> the highest reduction<br />
in the use of fossil fuels for every DKK of expenditure.<br />
This means that focus is not on large-scale use of<br />
technologies which require high subsidies. Instead, for<br />
these technologies focus is on research, development<br />
<strong>and</strong> demonstration, which in the long term can make<br />
them competitive, at lower levels of subsidy.<br />
Minimal impact on public finances<br />
The distribution of benefits <strong>and</strong> costs in connection with<br />
the transition must not burden public finances. Therefore,<br />
the transition is fully financed, with expenditures<br />
primarily covered by consumers of energy (companies as<br />
well as households).<br />
advantages of being part of an international energy<br />
market. For example, developing <strong>and</strong> participating in the<br />
European electricity market.<br />
The ambition is also for a renewable energy based<br />
transport sector. However, in respect of achieving this<br />
Denmark is dependent on international technological<br />
developments <strong>and</strong> therefore has to adapt the level<br />
of ambition to the future technological <strong>and</strong> economic<br />
development.<br />
Retaining competitiveness<br />
The transition needs to take the competitiveness of Danish<br />
businesses into account. This requires that companies<br />
know the long-term framework, within which they<br />
must operate, <strong>and</strong> that energy costs do not increase<br />
significantly.<br />
Full utilisation of international frameworks<br />
The transition will make full use of the opportunities of a<br />
globalised world <strong>and</strong> of ever closer EU cooperation. The<br />
goal is not a self-sufficient Denmark. On the contrary,<br />
Denmark will continue to exploit all the advantages of<br />
being part of an international energy market.<br />
The strategy will also ensure that the transition does not<br />
undermine nature or environmental assets. This implies<br />
for instance, that the infrastructure will take account<br />
of nature <strong>and</strong> people’s opportunities to enjoy it. It also<br />
entails a sustainable use of biomass resources.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
9
New challenges <strong>and</strong> new opportunities<br />
1<br />
New challenges <strong>and</strong> new opportunities for energy policy<br />
for energy policy<br />
10<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
The 21st century will have to be the century<br />
in which we find new solutions to satisfy the<br />
dem<strong>and</strong> for energy services, i.e. lighting,<br />
heating, transport, production etc.
<strong>Energy</strong> is a prerequisite for a modern society with economic<br />
growth <strong>and</strong> welfare. We take power <strong>and</strong> heating<br />
for granted, just as we take access to clean drinking<br />
water <strong>and</strong> clean air for granted. This has held true for<br />
most of the 20th century, <strong>and</strong> it should to apply for the<br />
21st century.<br />
However, for economic, strategic <strong>and</strong> environmental<br />
reasons, we will have to take a completely fresh look<br />
at the way in which we consume <strong>and</strong> produce energy.<br />
Over the last hundred years, western societies have had<br />
access to plentiful <strong>and</strong> relatively cheap fossil energy. The<br />
next 100 years will bring considerable change, with an<br />
increasing number of people dem<strong>and</strong>ing a share of the<br />
energy, while available fossil fuels become ever scarcer<br />
<strong>and</strong> <strong>oil</strong> resources are concentrated in the h<strong>and</strong>s of just<br />
a few countries. There is also the fact that global climate<br />
problems will require us to burn far less <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong>.<br />
The 21st century will have to be the century in which<br />
we find new solutions to satisfy the dem<strong>and</strong> for energy<br />
services, i.e. lighting, heating, transport, production etc.<br />
With these challenges also come new opportunities for<br />
Denmark, since the majority of countries will be faced<br />
with the same challenges, meaning that there will be a<br />
1973<br />
95% of<br />
Danish energy<br />
consumption<br />
covered by<br />
imported <strong>oil</strong><br />
Oil <strong>and</strong> <strong>gas</strong> <strong>from</strong><br />
the North Sea<br />
Figure 1.1 Phases in the transition of the Danish energy<br />
system<br />
The next 100 years will bring considerable<br />
change, with an increasing number of people<br />
dem<strong>and</strong>ing a share of the energy<br />
1985<br />
Electricity <strong>and</strong><br />
heating <strong>from</strong> <strong>coal</strong><br />
<strong>and</strong> natural <strong>gas</strong><br />
Increased<br />
energy efficiency<br />
considerable growth in the dem<strong>and</strong> for green technologies;<br />
an area in which Danish enterprises excel.<br />
A good foundation<br />
Over a number of years, Denmark has enjoyed high<br />
security of supply with world-class energy efficiency, <strong>and</strong><br />
an increasing share of renewable energy. This is due to<br />
a radical conversion of the Danish energy system since<br />
the first <strong>oil</strong> crisis in 1973. Firstly, considerable energy<br />
efficiency improvements have taken place at companies<br />
<strong>and</strong> in households, <strong>and</strong> energy production has likewise<br />
been made more efficient, for example through the<br />
expansion of district heating <strong>and</strong> combined heat <strong>and</strong><br />
power production (CHP). Secondly, the fuel mix has<br />
changed <strong>from</strong> 95% dependence on imported <strong>oil</strong> to a differentiated<br />
energy supply based on <strong>coal</strong>, <strong>oil</strong>, natural <strong>gas</strong><br />
<strong>and</strong> renewables.<br />
Independence of fossil fuels is to preserve this favourable<br />
situation in a future where Denmark <strong>and</strong> the rest of<br />
the world will experience increasing dem<strong>and</strong> for energy<br />
services, while the production of fossil fuels, especially<br />
<strong>oil</strong> <strong>and</strong> <strong>gas</strong>, will be concentrated in ever fewer countries<br />
<strong>and</strong> regions.<br />
2011<br />
High energy<br />
efficiency<br />
Large share of<br />
renewable energy<br />
Net exporter<br />
of energy<br />
<strong>2050</strong><br />
Denmark is<br />
independent<br />
of fossil fuels<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
11
New challenges <strong>and</strong> new opportunities for energy policy<br />
Security of supply under pressure<br />
The world’s population will increase towards 9 billion by<br />
<strong>2050</strong>. Many people will become wealthier <strong>and</strong> as a consequence,<br />
the dem<strong>and</strong> for energy for electricity, heating,<br />
transport <strong>and</strong> industry will increase. Within the next 25<br />
years alone, it is expected that the world’s total energy<br />
consumption will grow by approximately 34% according<br />
to calculations by International <strong>Energy</strong> Agency, IEA. This<br />
development is driven primarily by a growing dem<strong>and</strong> in<br />
large developing countries <strong>and</strong> growth economies such<br />
as China <strong>and</strong> India.<br />
18,000<br />
16,000<br />
14,000<br />
12,000<br />
10,000<br />
8,000<br />
6,000<br />
4,000<br />
2,000<br />
0<br />
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035<br />
Mto<br />
Figure 1.2. World primary energy dem<strong>and</strong> by region up to<br />
2035 (scenario based on national climate <strong>and</strong> energy policy<br />
targets).<br />
(World <strong>Energy</strong> Outlook © OECD/IEA, 2010)<br />
12<br />
China<br />
United States<br />
European Union<br />
India<br />
Middle East<br />
Japan<br />
Inter-regional (bunkers)<br />
Rest of world<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
As the need for energy grows, ever fewer fossil fuels will<br />
be available. In particular, the world’s <strong>oil</strong> reserves will be<br />
exhausted more quickly than new <strong>oil</strong> fields are discovered.<br />
Furthermore, for part of the remaining <strong>oil</strong>, extraction<br />
involves considerable environmental challenges.<br />
This applies, for example, to <strong>oil</strong> in the Arctic regions or to<br />
deepwater <strong>oil</strong> fields. Furthermore, it applies to <strong>oil</strong> production<br />
<strong>from</strong> natural <strong>gas</strong> <strong>and</strong> <strong>coal</strong>, tar s<strong>and</strong> <strong>and</strong> <strong>oil</strong> shale.<br />
As regards natural <strong>gas</strong> production, the situation is<br />
less critical, at least in the short <strong>and</strong> medium term. As<br />
regards <strong>coal</strong>, global occurrences are plentiful, but other<br />
factors, primarily the consideration for the global climate,<br />
necessitate limited use.<br />
In addition to this pressure on reserves, the world’s <strong>oil</strong>,<br />
<strong>and</strong> to a certain extent natural <strong>gas</strong> resources as well, are<br />
increasingly concentrated in just a few countries. Thus,<br />
the OPEC countries will account for an ever growing<br />
share of global <strong>oil</strong> supply, as illustrated in figure 1.3.<br />
Saudi Arabia<br />
Iraq<br />
Brazil<br />
Kazakhstan<br />
Canada<br />
Venezuela<br />
UAE<br />
Kuwait<br />
Iran<br />
Qatar<br />
Nigeria<br />
Libya<br />
Algeria<br />
0 1 2 3 4 5<br />
OPEC Non-OPEC<br />
Figure 1.3. Incremental <strong>oil</strong> production by key country, 2009-<br />
2035<br />
(World <strong>Energy</strong> Outlook © OECD/IEA, 2010)<br />
mb/d
Security of supply can be expressed as the probability<br />
that there will be energy services available at competitive<br />
prices when consumers dem<strong>and</strong> it, without this leaving<br />
Denmark in the unfortunate grip of dependency on other<br />
countries.<br />
(Source: Energiforsyningssikkerhed <strong>–</strong> Redegørelse om<br />
forsyningssikkerheden i Danmark, 2010; Report on energy<br />
security of supply in Denmark, 2010)<br />
Box 1.1 Definition of security of energy supply<br />
The increased concentration of <strong>oil</strong> <strong>and</strong> <strong>gas</strong> resources in<br />
relatively few countries <strong>and</strong> transit routes increases the<br />
vulnerability to accidents, war <strong>and</strong> terror, threatening<br />
security of supply <strong>and</strong> price stability. Furthermore, this<br />
exacerbates the potential for producer countries to exert<br />
political pressure, wield market influence <strong>and</strong> thus push<br />
prices upwards. The consequence of such a development<br />
is growing dependence on the <strong>oil</strong> <strong>and</strong> <strong>gas</strong> producing<br />
countries. Another consequence is the transfer of<br />
wealth <strong>from</strong> the <strong>oil</strong> <strong>and</strong> <strong>gas</strong> importing countries to the <strong>oil</strong><br />
<strong>and</strong> <strong>gas</strong> exporting countries. This transferral of wealth<br />
would be minimised if the consuming countries were to<br />
reduce their consumption <strong>and</strong> imports by instead investing<br />
in energy efficiency improvements <strong>and</strong> renewable<br />
energy.<br />
On the other h<strong>and</strong>, a shift to an energy supply based<br />
on renewables is not without security of supply challenges<br />
either. For example, incorporating large amounts<br />
of fluctuating electricity produced <strong>from</strong> wind power into<br />
the energy system presents a huge technical challenge.<br />
As regards biomass <strong>and</strong> biofuels, availability of these<br />
resources may also come under pressure both domestically<br />
<strong>and</strong> abroad. All indications are, however, that Denmark<br />
can manage these security of supply challenges,<br />
although this requires continued integration, expansion<br />
<strong>and</strong> liberalisation of the European energy market.<br />
On the basis of the IPCC’s recommendations,<br />
the EU has committed to the objective of<br />
reducing emissions by 80%-95% by <strong>2050</strong><br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
13
New challenges <strong>and</strong> new opportunities for energy policy<br />
The lasting climate challenge<br />
Future climate change due to greater greenhouse<br />
<strong>gas</strong> effects seems inevitable. Even in a very ambitious<br />
scenario, where global emissions of greenhouse <strong>gas</strong>es<br />
peak within the next few years <strong>and</strong> fall quickly hereafter,<br />
the atmosphere’s content of greenhouse <strong>gas</strong>es will only<br />
stabilise at present levels. This will undoubtedly contribute<br />
to a continued global temperature rise within this<br />
century. This prediction is confirmed by global temperature<br />
measurements which point at a continued rise in<br />
global mean temperatures. Furthermore, observations<br />
indicate, for example, that climate change in the Arctic<br />
is now occurring at an even faster pace than anticipated<br />
only a few years ago.<br />
With the Copenhagen Accord concluded at COP15 in<br />
December 2009, a large number of countries agreed<br />
that the greenhouse <strong>gas</strong> concentration in the atmosphere<br />
should be stabilised at a level corresponding to a<br />
global average temperature rise below 2 degrees Celsius.<br />
This objective was confirmed at COP16 in Cancún,<br />
in December 2010. According to the Intergovernmental<br />
Panel on Climate Change (IPCC), satisfying this objective<br />
requires the developed countries to reduce their combined<br />
emissions by 25%-40% by 2020 relative to 1990<br />
levels, <strong>and</strong> by 80%-95% by <strong>2050</strong> relative to 1990 levels<br />
as a step towards cutting global emissions by 50% by<br />
<strong>2050</strong>.<br />
On the basis of the IPCC’s recommendations, the EU<br />
has committed to the objective of reducing emissions<br />
by 80%-95% by <strong>2050</strong> relative to 1990 levels as a part<br />
of concerted efforts by the developed countries. The<br />
EU objective cannot readily be transferred to a Danish<br />
reduction commitment by <strong>2050</strong>, however it provides a<br />
good indication of the climate challenge which all EU<br />
member states, including Denmark now face.<br />
14<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
A global green growth market<br />
Denmark will become independence of fossil fuel. Over<br />
the coming years, many other countries will likewise<br />
have to decarbonise their economies. The global market<br />
for renewable energy <strong>and</strong> climate technologies, <strong>and</strong> for<br />
energy efficiency improvement solutions, will therefore<br />
grow considerably.<br />
Figure 1.4 below illustrates the combined, expected<br />
investment in renewable energy technologies, broken<br />
down by electricity production technologies <strong>and</strong> biofuels,<br />
in key countries <strong>and</strong> regions during the period 2010-<br />
2035, assuming current climate <strong>and</strong> energy policy objectives.<br />
This development in the global market will primarily<br />
take place in large growth markets such as India <strong>and</strong><br />
China, where energy dem<strong>and</strong> will grow at an explosive<br />
rate in the coming years. China has a goal of meeting<br />
15% of its energy consumption <strong>from</strong> non-fossil fuels by<br />
2020. However, also within the EU, the national plans of<br />
member states to meet the EU 2020 renewables targets,<br />
witness the need for large investments in green technologies<br />
over the next ten years.<br />
Indonesia<br />
Canada<br />
Russia<br />
Japan<br />
Brazil<br />
India<br />
USA<br />
EU<br />
China<br />
0<br />
300 600 900 1.200 1.500<br />
Billion dollars (2009)<br />
Electricity<br />
Biofuels<br />
Figure 1.4. <strong>Energy</strong> technology share of total goods exports<br />
in 2009, <strong>from</strong> Denmark <strong>and</strong> EU15 average<br />
(World <strong>Energy</strong> Outlook © OECD/IEA, 2010)
The International <strong>Energy</strong> Agency (IEA) estimates that, in<br />
the period 2010-2030, the required overall global investment<br />
in renewable energy will amount to USD 6 billion,<br />
provided countries realise their existing climate <strong>and</strong><br />
energy policy goals. If global emissions of greenhouse<br />
<strong>gas</strong>es are to be reduced in line with IPCC recommendations,<br />
according to the IEA this will require significant<br />
extra investments in climate <strong>and</strong> energy technology solutions<br />
at the consumer <strong>and</strong> supply sides, respectively.<br />
Exports of cleantech solutions<br />
Exports of cleantech solutions are already playing an<br />
ever increasing <strong>and</strong> ever more important role for overall<br />
production <strong>and</strong> exports. Exports of energy technologies<br />
<strong>and</strong> equipment accounted for approximately 12%<br />
of total Danish goods exports in 2009. This is almost<br />
twice the figure in 2000, <strong>and</strong> far more than in any other<br />
European country, see figure. 1.5.<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
%<br />
Exports of energy technologies <strong>and</strong> equipment<br />
accounted for approximately 12% of total<br />
Danish goods exports in 2009<br />
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009<br />
Denmark EU15<br />
Figure 1.5. <strong>Energy</strong> technology share of total goods exports<br />
in 2009, <strong>from</strong> Denmark <strong>and</strong> EU15 average<br />
Source: Danish <strong>Energy</strong> Agency<br />
Danish companies therefore already possess an array of<br />
key competences in the energy area. However, global<br />
competition to deliver solutions to the rapidly growing<br />
market is intensifying considerably. Retaining <strong>and</strong><br />
developing Danish skills <strong>and</strong> international market shares<br />
therefore places great dem<strong>and</strong>s on Danish companies.<br />
It is also essential to ensure Danish companies have optimal<br />
framework conditions in comparison with competitors<br />
abroad.<br />
Amongst other things, it is important that the transition<br />
of the energy system, in combination with targeted<br />
efforts within research, development, demonstration<br />
<strong>and</strong> preparation for market uptake, allows companies to<br />
assist in developing the new solutions. This will create<br />
the best business setting for developing new export<br />
technologies in Denmark. Obviously, it is important that<br />
this platform for cleantech companies is not detrimental<br />
to the competitiveness of the rest of the Danish business<br />
community.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
15
2A<br />
A flexible strategy<br />
flexible strategy<br />
16<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
The great challenge is to ensure an appropriate<br />
transition process. Over the next 40 years more<br />
or less the entire energy system will be replaced
In <strong>2050</strong> Denmark could well be a wealthy society which<br />
uses considerably less energy than at present <strong>and</strong> which<br />
covers its energy needs with renewable energy sources.<br />
This is clear <strong>from</strong> the analyses by the Danish Commission<br />
on Climate Change Policy. The great challenge is to<br />
ensure an appropriate transition process. Over the next<br />
40 years more or less the entire energy system will be replaced.<br />
In some areas, the consequences of investments<br />
<strong>and</strong> decisions made now will have an impact right up to<br />
<strong>2050</strong>. Therefore, it is important that energy policy supports<br />
the goal of fossil fuel independence. Without this,<br />
the goal will be harder <strong>and</strong> more expensive to reach.<br />
Denmark also has a number of energy <strong>and</strong> climate policy<br />
goals which set the scene for immediate measures.<br />
Therefore, it is necessary to adopt initiatives pointing<br />
towards the long-term goal of fossil fuel independence,<br />
<strong>and</strong> which contribute to meeting goals in the short <strong>and</strong><br />
medium term. <strong>Energy</strong> efficiency <strong>and</strong> renewables are the<br />
two key focus areas to put Denmark on track to meeting<br />
the long-term goal of fossil fuel independence <strong>and</strong><br />
to help meet the 2020 targets of increasing the share of<br />
renewables, reducing gross energy consumption, <strong>and</strong><br />
reducing non-ETS greenhouse <strong>gas</strong> emissions.<br />
Measures should be organised cost effectively to achieve<br />
the highest levels of security of supply <strong>and</strong> reductions<br />
in fossil fuels for each DKK invested. This means that<br />
measures should be targeted, <strong>and</strong> timing is vital. On the<br />
one h<strong>and</strong> measures should not be forced through with<br />
unnecessarily high expenditure right now. On the other<br />
h<strong>and</strong>, the benefits of less dependence on fossil fuels <strong>and</strong><br />
lower greenhouse <strong>gas</strong> emissions also have value in the<br />
years up to <strong>2050</strong>.<br />
Measures should be organised cost effectively<br />
to achieve the highest levels of security of sup-<br />
ply <strong>and</strong> reductions in fossil fuels<br />
An energy <strong>and</strong> transport system<br />
without fossil fuels<br />
Achievement of fossil fuel independence requires efficiency<br />
improvements in energy consumption to a level<br />
which can be covered by massive renewable energy<br />
expansion <strong>–</strong> although we will still exchange energy (electricity,<br />
biomass, biofuels etc.) with the world around us.<br />
The transition is outlined very generally in figure 2.1.<br />
800<br />
700<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
PJ/year<br />
0<br />
Households<br />
Trade <strong>and</strong> service<br />
Production<br />
Transport<br />
Ef�ciency improvements<br />
RE<br />
(possibly also CCS)<br />
Figure 2.1. <strong>Energy</strong> consumption <strong>and</strong> renewable energy<br />
2009. Source: Danish <strong>Energy</strong> Agency<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
Waste<br />
Other RE<br />
Bio<strong>gas</strong><br />
Wood<br />
Straw<br />
Wind<br />
<strong>Energy</strong> consumption 2009 Renewable energy consumption 2009<br />
17
A flexible strategy<br />
Key elements<br />
A number of technologies <strong>and</strong> focus areas already well<br />
known today will probably be pivotal in a cost effective<br />
transport <strong>and</strong> energy system without fossil fuels. The<br />
energy technologies with significance for the energy<br />
system today have been known <strong>and</strong> used for more than<br />
40 years. Clearly these technologies will develop, but it<br />
is likely that the energy system of <strong>2050</strong> will be borne by<br />
technologies we already know today. Likely elements in<br />
an energy <strong>and</strong> transport system independent of fossil<br />
fuels are:<br />
A highly efficient energy consumption<br />
A cost effective energy system, independent of fossil<br />
fuels, requires significant improvements in energy<br />
efficiency. Dem<strong>and</strong> for energy services will very likely be<br />
considerably higher than today, but energy services will<br />
be supplied using a lower amount of energy. Therefore,<br />
in <strong>2050</strong> Danish energy consumption could be more than<br />
50% more efficient overall. This is partly due to the fact<br />
that far-reaching energy efficiency improvements could<br />
make more financial sense than increasing energy supply.<br />
Electrification of heating,<br />
industry <strong>and</strong> transport<br />
There are strong indications that in <strong>2050</strong> many more<br />
energy services than today will come through electricity.<br />
District heating, individual heating systems <strong>and</strong> industrial<br />
installations can be based on electricity. Transport can<br />
be electrified by converting cars, railways <strong>and</strong>, to a cer-<br />
18<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
A cost effective energy system, independent<br />
of fossil fuels, requires significant<br />
improvements in energy efficiency<br />
tain extent, busses <strong>and</strong> lorries to electricity. This will also<br />
provide massive efficiency improvements as combustion<br />
motors typically waste four-fifths of the energy, while only<br />
one-fifth is lost in electric motors. Electric cars will probably<br />
be an important transport technology, but in 2011<br />
it is not possible to predict exactly the comparative roles<br />
<strong>and</strong> advantages of, for example, electric cars, plug-in<br />
hybrids or fuel-cell cars, in <strong>2050</strong>.<br />
More electricity <strong>from</strong> wind power<br />
It is very likely that wind power will account for a very<br />
large amount of future electricity production. Wind is<br />
one of the renewable energy sources showing greatest<br />
physical potential in Denmark, <strong>and</strong> costs are expected to<br />
drop. In principle, wind power could cover current levels<br />
of electricity consumption many times over. Today, production<br />
costs are lowest for onshore turbines, but there<br />
are only limited locations to site them. Therefore, offshore<br />
wind turbines will probably be crucial, even though production<br />
costs are higher than for onshore installations.<br />
An efficient utilisation of<br />
biomass resources<br />
In the future, biomass will play an even more important<br />
role in the energy system than today. This will be to<br />
cover a large proportion of CHP production, <strong>and</strong> also<br />
probably to produce biofuels for heavy <strong>and</strong> very energydem<strong>and</strong>ing<br />
modes of transport such as aircraft <strong>and</strong><br />
heavy goods vehicles. However, the potential in biomass<br />
is not unlimited. If global dem<strong>and</strong> for biomass increases,<br />
so will the costs of utilising biomass.
Utilisation of bio<strong>gas</strong><br />
The natural <strong>gas</strong> grid <strong>and</strong> its associated storage facilities<br />
could also play a key role in an energy system without<br />
fossil fuels. This may be through utilising bio<strong>gas</strong> <strong>and</strong><br />
possibly other types of <strong>gas</strong> <strong>from</strong> organic sources. RE<br />
<strong>gas</strong>ses can be used at CHP plants in the same way as<br />
solid biomass <strong>and</strong> thereby they can act as a balance for<br />
the fluctuating electricity production <strong>from</strong> wind turbines.<br />
Photovoltaic solar modules <strong>and</strong><br />
wave power as supplements<br />
In the longer term, photovoltaic solar modules <strong>and</strong> wave<br />
power could replace some wind power. How much wind<br />
power they will replace will depend on technological development.<br />
Photovoltaic solar modules are a well tested<br />
technology, but at present they are more expensive than<br />
electricity <strong>from</strong> wind turbines. However, there may be<br />
technical <strong>and</strong> financial advantages in spreading electricity<br />
production between different technologies. Wave<br />
power is still at the developmental stage, but it may play<br />
a role in the long term.<br />
Spreading RE-based district<br />
heating <strong>and</strong> individual heating<br />
District heating systems make it possible to incorporate<br />
large amounts of fluctuating renewable energy at relatively<br />
low investment requirements. Continued exploitation<br />
<strong>and</strong> expansion of this infrastructure is an important<br />
element. There are strong indications of significant cost<br />
effectiveness potentials in converting <strong>from</strong> individual<br />
natural <strong>gas</strong> supply to district heating. The challenge is to<br />
find an appropriate cut-off between district heating <strong>and</strong><br />
individual heating in a technical <strong>and</strong> economic context.<br />
An intelligent energy system<br />
<strong>Energy</strong> production with significant amounts of fluctuating<br />
energy places pressure on the energy system to ensure<br />
that energy consumption can be covered hour by hour.<br />
Most important is exchange with foreign countries, <strong>and</strong><br />
this requires gradual expansion of transmission capacity.<br />
In addition, there is the need for more flexible (intelligent)<br />
electricity consumption so that electricity is used for heat<br />
pumps, electric b<strong>oil</strong>ers <strong>and</strong> to recharge electric cars, for<br />
example, when there are strong winds <strong>and</strong> normal electricity<br />
consumption is low. Finally, there will be a need for<br />
electricity storage capacity which can be supplied cost<br />
effectively by the Norwegian <strong>and</strong> Swedish hydropower<br />
facilities. However, it is possible that other types of electricity<br />
storage, for example based on battery technology,<br />
could in the future supplement foreign electricity trade.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
19
A flexible strategy<br />
Nuclear power - still many arguments against<br />
In 1985 the Danish Parliament (the Folketing) decided<br />
that nuclear power would not be part of Danish energy<br />
planning. There remain arguments against nuclear power<br />
in Denmark. It would be difficult to find locations for<br />
nuclear power plants in Denmark <strong>and</strong> there is limited<br />
Danish growth potential in the technology, because the<br />
technology has to be purchased <strong>from</strong> abroad. Finally,<br />
there are still challenges with regard to safety <strong>and</strong> disposing<br />
of radioactive waste.<br />
Experience with regard to the economics of nuclear<br />
power varies greatly. In many cases installations are fully<br />
or partly owned by the state, with a number of direct or<br />
indirect subsidies for nuclear power. Theoretical comparisons<br />
between the economics of nuclear power <strong>and</strong><br />
other types of production indicate that nuclear power<br />
provides relatively cheap electricity. In practice, however,<br />
there are many examples of nuclear power plants which<br />
significantly exceed budgets.<br />
On the basis of information <strong>from</strong> the new Finnish nuclear<br />
power plant, Olkiluoto-3, which has been plagued by<br />
long delays <strong>and</strong> budget overshoots, investment per unit<br />
of electricity capacity is about 3.5-times more than <strong>coal</strong><br />
power, approximately eight-times more than <strong>gas</strong> power<br />
<strong>and</strong> two-three-times more than wind power. The high<br />
investment costs of nuclear power must be recouped<br />
Box 2.1 Nuclear power<br />
20<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
through operating revenues, <strong>and</strong> this is possible if the<br />
plants are in operation for a long time. With considerable<br />
uncertainty, it has been estimated that for Danish<br />
conditions, nuclear power <strong>and</strong> offshore wind power cost<br />
almost the same, although it should be noted that the<br />
economics of nuclear power plants are very sensitive to<br />
interest rates.<br />
There are system challenges linked to incorporating nuclear<br />
power in Denmark into an electricity system dominated<br />
by fluctuating wind power <strong>and</strong> electricity production<br />
bound to heating. Furthermore, there are relatively<br />
large variations in electricity consumption over a 24-hour<br />
period in Denmark (compared with countries with more<br />
energy-intensive industry <strong>and</strong> more electric heating, for<br />
example Finl<strong>and</strong> <strong>and</strong> Sweden). For economic <strong>and</strong> technical<br />
reasons, nuclear power plants should preferably<br />
operate at full capacity all the time, <strong>and</strong> therefore they<br />
are not very suitable for adjustment to compensate for<br />
variations in wind production.<br />
Although there are several arguments against basing<br />
Danish electricity production on nuclear power, at all<br />
events Denmark will continue to trade electricity with<br />
other countries <strong>and</strong> therefore also import electricity <strong>from</strong><br />
countries where nuclear power will account for a considerable<br />
amount of electricity production in the future.
Observed climate change<br />
The average temperature in Denmark has increased by 1.5°C <strong>and</strong> precipitation has increased by 15% since systematic<br />
national records began in 1873. The Danish wind climate has also changed over the period. More powerful storms<br />
<strong>and</strong> hurricanes have been observed. In the future even greater climatic changes can be expected, with potential<br />
consequences for the energy system.<br />
The energy need<br />
Up to <strong>2050</strong> it is expected that winters will become warmer, with correspondingly shorter heating seasons. Therefore,<br />
there could be slightly less need for space heating. In contrast, the need for cooling in summer (primarily in offices,<br />
shops etc.) is expected to rise in line with longer heat waves. In new housing, the new building st<strong>and</strong>ards will limit the<br />
need for cooling, but for existing housing there may be increased dem<strong>and</strong> for cooling installations.<br />
<strong>Energy</strong> production<br />
Up to <strong>2050</strong> there are chances of a longer growing season. Together with higher temperatures <strong>and</strong> more precipitation<br />
in the summer, this could lead to more biomass production in both agriculture <strong>and</strong> forestry. As winters become wetter<br />
<strong>and</strong> milder, there will also be good opportunities for more energy production <strong>from</strong> hydropower in Norway <strong>and</strong> Sweden.<br />
In addition a modest increase in wind energy potential is also expected.<br />
Extremes<br />
Towards <strong>2050</strong> more, <strong>and</strong> more powerful hurricanes may disrupt the electricity grid <strong>and</strong> infrastructure <strong>and</strong> mean that<br />
wind turbines will be shut down for short periods. However, it has been estimated that these effects will only have<br />
marginal significance for the security <strong>and</strong> stability of the electricity system. On the other h<strong>and</strong> more, <strong>and</strong> more powerful<br />
hurricanes, in conjunction with more precipitation, could lead to a greater likelihood of massive windfalls <strong>and</strong> this<br />
may affect international markets for chippings <strong>and</strong> wood pellets.<br />
Consequences<br />
Overall, the conclusion is that the expected milder winters in the future will have a modest, yet positive impact on<br />
the Danish energy system <strong>and</strong> the possibilities for the transition to fossil fuel independence, although there is a large<br />
degree of uncertainty regarding the future dem<strong>and</strong> for cooling.<br />
The strategy for fossil fuel independence proposes a number of new energy policy initiatives, which are deemed as<br />
robust in relation to future climate change. Furthermore, there is the ongoing monitoring <strong>and</strong> evaluation of climate <strong>and</strong><br />
energy policy, <strong>and</strong> this will also have to take account of observed climate change.<br />
Box 2.2 Potential changes in the Danish climate <strong>and</strong> the<br />
possible effects on the energy system<br />
<strong>Energy</strong> <strong>Strategy</strong> Energistrategi <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>2050</strong> <strong>oil</strong> <strong>–</strong> farvel <strong>and</strong> <strong>gas</strong> til to kul, green olie energy. og <strong>gas</strong><br />
21
A flexible strategy<br />
An unpredictable future<br />
dem<strong>and</strong>s flexible answers<br />
On the one h<strong>and</strong>, it is possible to mark out the contours<br />
of an energy system in <strong>2050</strong> without fossil fuels <strong>and</strong> to<br />
identify a number of the key elements. However, on the<br />
other h<strong>and</strong> it is impossible to predict economic growth,<br />
technological development or fuel <strong>and</strong> CO2 prices 40<br />
years ahead, <strong>and</strong> in so doing detail the optimal energy<br />
system for <strong>2050</strong>.<br />
Development <strong>and</strong> costs of technologies <strong>and</strong> fuels will<br />
depend to a large extent on the level of ambition for<br />
climate <strong>and</strong> energy policy set by the rest of the world. At<br />
the same time these aspects are crucial for determining<br />
how best to achieve a cost effective energy system without<br />
fossil fuels. For example, investors’ choice between<br />
electricity production technologies will be based on the<br />
relative costs of the various fuels, technologies, financing<br />
etc. In the long term, cost effective transition will<br />
therefore involve securing more or less uniform support<br />
across technologies in which account is also taken for<br />
the effects of the technologies in relation to, for example,<br />
relevant political objectives, environmental impacts <strong>and</strong><br />
security of supply.<br />
A robust <strong>and</strong> cost effective strategy<br />
The government will organise the transition so that it is<br />
robust <strong>and</strong> cost effective. On the basis of the knowledge<br />
available today, it is expected that the goal of fossil fuel<br />
independence will be realised most cost effectively by<br />
making energy consumption more efficient; with more<br />
electrification of energy consumption in combination<br />
with greater electricity exchange <strong>and</strong> a more intelligent<br />
energy system; with more district heating <strong>and</strong> individual<br />
RE-based heating; with expansion of wind power <strong>and</strong><br />
other renewables; <strong>and</strong> finally with effective utilisation of<br />
biomass resources for CHP <strong>and</strong> parts of the transport<br />
sector.<br />
22<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
On the other h<strong>and</strong>, electric cars, solar energy, wave<br />
power, CCS <strong>and</strong> so on are currently relatively expensive<br />
technologies, which require continued subsidies. However,<br />
this can change over time. Therefore, the strategy<br />
should be flexible, i.e. open for all technological possibilities.<br />
For example, the government will not yet exclude<br />
some utilisation of <strong>coal</strong> with CCS, if this proves to be<br />
a more cost effective <strong>and</strong> environmentally appropriate<br />
solution in a green transition. If it turns out to be technically<br />
<strong>and</strong> economically untenable to convert the entire<br />
transport sector to non-fossil alternatives, it will also be<br />
necessary to manage the security of supply issue <strong>and</strong><br />
climate impacts in some other way.<br />
CCS<br />
Coal power combined with CCS (Carbon Capture <strong>and</strong><br />
Storage), could also be a relevant technology in the longer<br />
term, possibly in combination with biomass, whereby<br />
CO2 is “withdrawn” <strong>from</strong> the system. There are relatively<br />
large <strong>coal</strong> resources globally <strong>and</strong> Denmark has geological<br />
formations well suited to depositing CO2. The CCS<br />
technology is not yet commercially viable <strong>and</strong> involves<br />
high costs <strong>and</strong> energy consumption. However, there is<br />
no reason to exclude this technology <strong>from</strong> being part of<br />
the Danish energy system at a later date.<br />
Hydrogen<br />
Biomass could be a limited resource in the future. A<br />
replacement could be other fuels such as hydrogen in<br />
the transport sector rather than biofuels, or hydrogen<br />
for electricity <strong>and</strong> heating instead of biomass. Hydrogen<br />
cannot be found in nature <strong>and</strong> therefore it has to be<br />
manufactured, for example using electricity <strong>from</strong> wind<br />
turbines for electrolysis. There is great potential, but at<br />
present prospects are inhibited financially because of<br />
losses in manufacture, storage <strong>and</strong> conversion of the<br />
hydrogen.<br />
Box 2.3 Examples of technologies which could play a role in<br />
a <strong>2050</strong> perspective
Figure 2.2 illustrates that, in addition to the key elements,<br />
there are a great many possible variations with clear<br />
significance for how the energy <strong>and</strong> transport system of<br />
the future is best designed. For example the relationship<br />
between wind, photovoltaic solar modules, wave power<br />
<strong>and</strong> other RE technologies will depend on technological<br />
developments <strong>and</strong> how they compare financially.<br />
Correspondingly, transition <strong>from</strong> fossil fuels to biomass<br />
will depend on potentials to produce as well as import<br />
biomass at reasonable prices.<br />
Fewer savings<br />
realised<br />
Need for more<br />
wind <strong>and</strong> biomass<br />
Figure 2.2 Key elements<br />
in the future energy system<br />
<strong>and</strong> variations<br />
The government will organise the transition<br />
so that it is robust <strong>and</strong> cost effective<br />
Less need for wind<br />
Cheap wood/straw for<br />
electricity production<br />
Less exchange of<br />
electricity due to<br />
high electricity prices<br />
There is a crucial uncertainty in developing competitive<br />
alternatives to the combustion engine. The solutions<br />
which come to dominate the transport sector will have<br />
an impact on other parts of the energy system. Finally,<br />
but also importantly, the need for foreign trade should<br />
be considered in the light of relative prices for imported<br />
electricity compared with Danish adjustable production,<br />
or possible new storage options.<br />
Coal with CCS<br />
commercially attractive<br />
Less need for wind<br />
• Efficient energy consumption<br />
• Increased use of district heating <strong>and</strong><br />
individual heating based on renewable<br />
energy<br />
• Wind power for electricity production<br />
supplemented by other RE technologies<br />
• Efficient use of biomass (including bio<strong>gas</strong>)<br />
for CHP <strong>and</strong> parts of the transport<br />
sector<br />
• Electrification of the energy system<br />
• Intelligent electricity consumption <strong>and</strong><br />
increased storage <strong>and</strong> exchange of<br />
energy with other countries<br />
More controllable<br />
domestic production<br />
Commercial break-<br />
through for new RE<br />
Less need for<br />
wind <strong>and</strong> biomass<br />
Need for greater<br />
imports of biofuels<br />
Limited electrification<br />
of transport<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
23
A flexible strategy<br />
A strategy with robust choices<br />
<strong>and</strong> the right timing<br />
In this strategy for fossil fuel independence, the government<br />
is focussing efforts on elements which are robust<br />
<strong>and</strong> expected to make up the core of a cost effective<br />
energy <strong>and</strong> transport system without fossil fuels. Efforts<br />
should also take account of the lifetimes of the relevant<br />
technologies <strong>and</strong> installations, the length of time <strong>from</strong><br />
decision to practical implementation, the need to retain<br />
knowledge <strong>and</strong> skills, as well as the issue of maturity <strong>and</strong><br />
prices of the relevant technologies.<br />
Long operational life in the energy sector<br />
The energy system is made up of both the producer <strong>and</strong><br />
consumer sides of a number of technologies <strong>and</strong> installations<br />
which call for huge investment <strong>and</strong> which have a<br />
long operational life. For example, power plants typically<br />
run for 30 years or more <strong>and</strong> the buildings often st<strong>and</strong><br />
for more than 100 years. This means that in the transition<br />
of the energy system it will have to be considered<br />
when the existing installations will wear out <strong>and</strong> require<br />
replacement or renovation, in order to avoid unnecessarily<br />
scrapping well functioning installations. It is also<br />
vital to choose future-proof solutions when replacement<br />
or renovation of, for example, buildings is carried out. In<br />
some circumstances this will only happen once before<br />
<strong>2050</strong>.<br />
Long time <strong>from</strong> decision to<br />
practical implementation<br />
Many types of installation in the energy sector require a<br />
long time for decision-making, planning <strong>and</strong> establishment<br />
processes. A large offshore wind farm often takes<br />
at least five-six years <strong>from</strong> decision to commencement<br />
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of operation. New high tension installations or central<br />
power plants can easily take up to 10 years <strong>from</strong> decision<br />
to implementation. This means that many of the<br />
decisions made today will not take effect for five, 10 or<br />
even 15 years.<br />
Great need for skills <strong>and</strong> knowledge<br />
The rate of transition should also be considered in the<br />
context of development <strong>and</strong> retention of skills as well<br />
as building new knowledge. Danish companies already<br />
possess an array of key skills in the energy area. These<br />
include RE technology <strong>and</strong> efficient technologies, as well<br />
as knowledge <strong>and</strong> experience on integrating renewables.<br />
A crucial element in retaining these companies’ development<br />
departments is that it is possible to realise results<br />
<strong>and</strong> to develop new knowledge on the basis of specific<br />
experience <strong>from</strong> applying new technology. Innovation,<br />
production <strong>and</strong> application cannot be considered independently<br />
of each other.<br />
Large differences in technological<br />
maturity <strong>and</strong> prices<br />
Today there are already technologies in a number of subsectors<br />
in the energy system which are or are expected<br />
to soon becoming financially <strong>and</strong> technologically competitive<br />
with technologies using fossil fuels. For example,<br />
wind turbines <strong>and</strong> biomass to produce electricity. In<br />
other areas technologies have yet to be fully developed<br />
to be able to completely replace fossil fuels. In this context<br />
there is a need for further research <strong>and</strong> demonstration<br />
in collaboration with foreign knowledge centres. For<br />
example, in transport there remain a number of challenges<br />
before full transition to non-fossil technologies such<br />
as electric cars, biofuels or fuel cells can take place.
Degree of commercialisation<br />
Mass market<br />
Niche markets<br />
Development<br />
Figure 2.3 Non-fossil-based energy<br />
<strong>and</strong> transport technologies<br />
Innovation, production <strong>and</strong> application<br />
cannot be considered independently of<br />
each other<br />
Technologies at the<br />
prototype <strong>and</strong><br />
demonstration stage<br />
(e.g. hydrogen technologies<br />
<strong>and</strong> CCS)<br />
Technologies on the<br />
verge of being mature for<br />
market <strong>and</strong> with low costs<br />
(e.g. wind power <strong>and</strong><br />
biomass)<br />
Technologies on the<br />
verge of being mature for<br />
market but with high costs<br />
(e.g. photovoltaic solar<br />
modules)<br />
Technologies<br />
mature for market<br />
(e.g. hydropower)<br />
Time<br />
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25
A flexible strategy<br />
A strategy with three tracks<br />
Operational life, decision-making processes, technological<br />
maturity <strong>and</strong> prices vary across the energy system.<br />
The same applies for the need to retain <strong>and</strong> develop<br />
knowledge <strong>and</strong> Danish skills. Therefore the government’s<br />
Track 1<br />
Track 2<br />
Track 3<br />
Figure 2.4 Illustration of the three tracks in the strategy<br />
The transition track (track 1) deals with the areas in<br />
which physical conversion can already start today because<br />
the technology is cost effective with long operational<br />
life <strong>and</strong> decision-making processes. In addition,<br />
because the areas involved also contribute to realising<br />
short <strong>and</strong> medium-term objectives.<br />
The planning <strong>and</strong> preparation track (track 2) deals with<br />
areas in which initially there is a need to ensure establishment<br />
of the framework before specific measures towards<br />
<strong>2050</strong> can be initiated.<br />
26<br />
2011<br />
Immediate initiatives<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
strategy follows three tracks. The strategy starts up<br />
immediate initiatives in all three tracks, but the types of<br />
initiative vary.<br />
Transition to more efficient energy consumption <strong>and</strong> energy supply based on renewable energy<br />
Preparation <strong>and</strong> planning of the<br />
next phase of the transition<br />
Research, development<br />
<strong>and</strong> demonstration<br />
More utilisation <strong>and</strong> integration of new<br />
solutions in the energy <strong>and</strong> transport system<br />
Large-scale demonstration<br />
<strong>and</strong> preparation for market<br />
Utilisation <strong>and</strong> integration in the<br />
transport <strong>and</strong> energy system<br />
<strong>2050</strong><br />
The technology development track (track 3) deals with<br />
areas in which the primary need is for more knowledge,<br />
analysis, research, <strong>and</strong> development as well as demonstration<br />
<strong>and</strong> preparation for market efforts before concrete<br />
incorporation into the energy <strong>and</strong> transport system<br />
of the future can be implemented.<br />
Chapter 3 describes the specific initiatives in the strategy<br />
which can be implemented within the three tracks<br />
immediately.
Track 1. Examples where the transition will commence immediately:<br />
Making buildings more efficient<br />
Extensive improvements in the energy efficiency of existing<br />
buildings should be implemented in connection with<br />
renovation <strong>and</strong> replacement in order for them to be cost<br />
effective. At the same time, efficiency improvements<br />
contribute immediately to meeting the 2020 targets.<br />
Electrification of heating <strong>and</strong> process installations<br />
Installations to heat buildings <strong>and</strong> for industrial processes<br />
have a long operational life; typically 25 years or more.<br />
Therefore it is advisable to start converting to electricity<br />
or heat pumps already now, as <strong>oil</strong> <strong>and</strong> <strong>gas</strong> furnaces <strong>and</strong><br />
b<strong>oil</strong>ers have to be replaced. This will also contribute to<br />
meeting the 2020 targets.<br />
Track 2. Examples where transition has to be prepared <strong>and</strong> planned:<br />
Planning of the energy infrastructure<br />
Integration of more fluctuating electricity production<br />
<strong>and</strong> electrification of end use involves a long-term need<br />
to develop the infrastructure. In this context, the <strong>gas</strong><br />
infrastructure of the future should also be planned with<br />
a view to enabling bio<strong>gas</strong> <strong>and</strong> other RE <strong>gas</strong>ses to take<br />
over <strong>from</strong> natural <strong>gas</strong> to a certain extent. This means<br />
that planning must commence immediately.<br />
Track 3. Examples of areas with a need for further research, development <strong>and</strong> demonstration:<br />
Research focussing on incorporating wind power<br />
Denmark’s vast wind resources provide future opportunities<br />
to harvest large parts of energy consumption <strong>from</strong><br />
the wind. Increased incorporation of wind requires, however,<br />
continued research <strong>and</strong> technological advances<br />
to reduce the energy costs <strong>and</strong> optimise the interplay<br />
of wind power with the electricity grid <strong>and</strong> electricity<br />
consumption, including methods to store the energy for<br />
a period.<br />
Box: 2.4 Examples of the initiatives in the three tracks<br />
Expansion of wind power<br />
Wind power seems to be cost effective <strong>and</strong> robust<br />
against future developments in fuel <strong>and</strong> CO2 prices,<br />
<strong>and</strong> it will be able to replace a great deal of the existing<br />
electricity capacity which will have to be replaced over<br />
the next 10-20 years.<br />
Increased use of biomass<br />
Biomass can play a central role in combination with wind<br />
production <strong>and</strong> possibly also in connection with <strong>coal</strong> <strong>and</strong><br />
CCS. In the short term, conversion to more biomass at<br />
power plants could reduce use of fossil fuels <strong>and</strong> thereby<br />
contribute to meeting the target of 30% renewable<br />
energy by 2020.<br />
Framework for future district heating production<br />
District heating production will change as consumption<br />
of fossil fuels at electricity <strong>and</strong> CHP plants is phased out.<br />
As this involves long-term investments, there is a need<br />
to set the framework for future district heating production<br />
now, through amongst other things strategic energy<br />
planning.<br />
Large-scale demonstration<br />
A large number of technologies may require large-scale<br />
testing before subsequent preparation for market <strong>and</strong><br />
full-scale implementation. For example, this applies for<br />
offshore wind, fuel cells for CHP production, smart grids,<br />
biorefineries, low-energy building <strong>and</strong> energy renovation.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
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Initiatives in the strategy<br />
Initiatives in the strategy<br />
3<br />
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<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
The package includes initiatives with<br />
immediate effect, initiatives setting out<br />
long-term frameworks, <strong>and</strong> initiatives that<br />
encourage more technological development.
With this strategy, the government presents a package<br />
of energy <strong>and</strong> climate policy initiatives. The package includes<br />
initiatives with immediate effect, initiatives setting<br />
out long-term frameworks, <strong>and</strong> initiatives that encourage<br />
technological development.<br />
The package consists of initiatives that promote:<br />
• Good framework conditions for future electricity <strong>and</strong><br />
heat production<br />
• Increased expansion of wind power<br />
• Greater use of biomass<br />
• A solid foundation for bio<strong>gas</strong> expansion<br />
• Highly efficient energy consumption<br />
• Efficiency improvements in households <strong>and</strong> in buildings<br />
in general<br />
• A cohesive <strong>and</strong> intelligent energy system<br />
• Transition to green energy in the transport sector<br />
• An energy system with appropriate financial incentives<br />
• A transition which creates green growth through<br />
research, development, demonstration <strong>and</strong> preparation<br />
for market<br />
• Ambitious endeavours for a global transition<br />
• An EU independent of fossil fuels<br />
• Long term reduction in the emission of greenhouse<br />
<strong>gas</strong>es <strong>from</strong> agriculture<br />
• Efficient <strong>and</strong> environmentally sound use of North Sea<br />
resources.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
29
<strong>Energy</strong> efficiency improvements<br />
Enhancement <strong>and</strong> targeting of saving efforts by energy<br />
companies aimed at private homes <strong>and</strong> businesses.<br />
Future-proof efficiency st<strong>and</strong>ards for<br />
building components to ensure houses<br />
which are more energy efficient.<br />
No new <strong>oil</strong> b<strong>oil</strong>ers in new buildings <strong>from</strong> 2012<br />
<strong>and</strong> Initiatives in existing in buildings the strategy <strong>from</strong> 2017.<br />
Market promotion of RE-based<br />
alternatives to <strong>oil</strong> <strong>and</strong> <strong>gas</strong> heating.<br />
Promotion of new buildings with very<br />
low energy consumption.<br />
Enhanced energy saving efforts in the public sector.<br />
Heating <strong>and</strong> electricity production<br />
Call for tenders for a 600MW offshore<br />
wind farm at Kriegers Flak.<br />
Call for tenders for smaller offshore wind turbine<br />
installations totalling 400MW closer to the coast than<br />
the actual wind farms. Initiatives for more onshore<br />
wind power, aiming at an additional 500MW.<br />
Fuel shift <strong>from</strong> <strong>coal</strong> to biomass at large-scale<br />
plants with greater freedom of agreement<br />
between producers <strong>and</strong> buyers.<br />
Shift <strong>from</strong> natural <strong>gas</strong> to biomass at smallscale<br />
CHP plants with free choice of fuel.<br />
Improved framework conditions<br />
for production of bio<strong>gas</strong>.<br />
Funds for strategic energy planning in<br />
municipalities with a view to better utilisation of<br />
local resources, including district heating.<br />
Transport<br />
A 10% biofuels obligation in the transport<br />
sector by 2020. Technology assessment<br />
in order to support the right framework<br />
conditions for new transport technologies.<br />
Fund to promote the establishment of<br />
recharging stations for electric cars. Efforts<br />
to tighten EU st<strong>and</strong>ards on vehicle energy<br />
efficiency <strong>and</strong> CO2 emissions.<br />
Push for EU harmonisation <strong>and</strong> st<strong>and</strong>ardisation<br />
of technologies for electric cars.<br />
An intelligent <strong>and</strong> international energy system<br />
New international electricity transmission capacity in<br />
connection with the offshore wind park at Kriegers Flak.<br />
Analysis of the need to exp<strong>and</strong><br />
international transmission grid.<br />
Roll-out of intelligent electricity meters.<br />
<strong>Strategy</strong> for the promotion of smart grids.<br />
Analysis of the regulation of the future <strong>gas</strong> structure.<br />
30<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
Central elements of the<br />
energy system in <strong>2050</strong><br />
Efficient energy<br />
consumption<br />
Increased use of district<br />
heating <strong>and</strong> individual<br />
heating based on<br />
renewable energy.<br />
Wind power in electricity<br />
production supplemented<br />
by other RE technologies.<br />
Efficient use of biomass<br />
(including bio<strong>gas</strong>) for CHP<br />
<strong>and</strong> parts of the transport<br />
sector.<br />
An electrified energy<br />
system.<br />
Intelligent electricity consumption<br />
<strong>and</strong> increased<br />
storage <strong>and</strong> cross-border<br />
trade in energy.<br />
Cross-sectional<br />
measures<br />
Enhanced prioritisation<br />
<strong>and</strong> cohesion in<br />
research, development<br />
<strong>and</strong> demonstration in the<br />
climate <strong>and</strong> energy area.<br />
Support for large-scale<br />
demonstration <strong>and</strong><br />
preparation for market<br />
of new RE technologies<br />
(solar, large heat pumps,<br />
geothermal energy etc.).<br />
Review of regulation of<br />
the Danish electricity<br />
supply sector.<br />
Examination of the subsidy<br />
<strong>and</strong> tax systems.<br />
Efforts to increase the<br />
EU greenhouse <strong>gas</strong><br />
reduction target to 30%<br />
by 2020.<br />
Figure 3.1 From 2011 to <strong>2050</strong>. Key initiatives in the strategy
Background The government will<br />
Good framework conditions for future<br />
electricity <strong>and</strong> heat production<br />
A large part of Denmark’s consumption of fossil fuels, in<br />
the form of <strong>coal</strong> <strong>and</strong> <strong>gas</strong>, is used to produce electricity<br />
<strong>and</strong> district heating. Extensive conversion of the electricity<br />
<strong>and</strong> heating sector to renewable energy is an essential<br />
step towards independence of fossil fuels.<br />
Since supply technologies <strong>and</strong> infrastructure in electricity<br />
<strong>and</strong> heat production generally have very long life spans,<br />
in many cases there will be only one opportunity to convert<br />
before <strong>2050</strong>. It is anticipated that a great number<br />
of Danish plants will either be taken out of operation or<br />
will wear out before 2020 <strong>and</strong> have to invest if they are<br />
to maintain production of heat . All things being equal, it<br />
will be cheaper to replace worn out installations than to<br />
replace still functioning installations. Therefore, the most<br />
appropriate solution is to make the shift away <strong>from</strong> fossil<br />
fuels when an existing plant is worn out. Furthermore,<br />
it must be anticipated that electricity consumption will<br />
increase as an ever greater share of energy consumption<br />
is electrified. It is therefore important that frameworks are<br />
established today which underpin investments in technologies<br />
bringing us closer to the <strong>2050</strong> target.<br />
Furthermore, in the short term, the need for new RE<br />
capacity is justified by the target of a 30% share of renewables<br />
by 2020. Meeting <strong>and</strong> upholding this target will<br />
require significant efforts in the years to come.<br />
Being the most developed <strong>and</strong> most cost-effective<br />
sources of energy, biomass <strong>and</strong> wind will play primary<br />
roles in an energy system without fossil fuels. In the<br />
long term, other technologies may also come into play.<br />
Continued support will therefore be necessary for the<br />
development of a wide range of RE technologies.<br />
As a general rule, the government’s goal of fossil fuel<br />
independence means no use of fossil fuels in <strong>2050</strong>.<br />
However, the government will not a priori exclude some<br />
use of <strong>coal</strong> with CCS, if this turns out to be an efficient,<br />
feasible <strong>and</strong> environmentally appropriate solution in a<br />
green transition.<br />
• Launch an in-depth review of electricity supply legislation<br />
<strong>and</strong> regulation in order to ensure that incentives<br />
<strong>and</strong> rules support the transition to fossil fuel independence.<br />
In the long term, other areas of energy<br />
supply will also be reviewed<br />
• Allocate DKK 20 million for strategic energy planning<br />
partnerships between municipalities, local companies<br />
<strong>and</strong> energy companies. These funds are to promote<br />
the integrated development of energy dem<strong>and</strong> <strong>and</strong><br />
energy supply which underpins the transition to fossil<br />
fuel independence. This is to take place e.g. through<br />
the expansion of district heating<br />
• Allocate DKK 10 million for demonstration of large<br />
heat pumps in the district heating sector, <strong>and</strong> analyse<br />
the conditions for, <strong>and</strong> implications of, the phasing-in<br />
of large heat pumps<br />
• Allocate DKK 20 million for geothermal energy exploration<br />
projects<br />
• Extend the existing PSO scheme that supports small<br />
electricity-producing renewable energy technologies<br />
such as wave power, bio-<strong>gas</strong>ification <strong>and</strong> solar<br />
photovoltaics for a further four years, so that a total<br />
of DKK 100 million is allocated for the period<br />
• Allocate DKK 10 million to support demonstration<br />
projects on solar heating for household solutions,<br />
including use of solar heating in combination with<br />
other RE solutions such as heat pumps. Efforts will<br />
also include an information campaign <strong>and</strong> the launch<br />
of a certification/quality assurance scheme<br />
• Work for a revision of the EU’s CHP Directive towards<br />
an efficient energy system in a future EU free of fossil<br />
fuels.<br />
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Initiatives in the strategy<br />
32<br />
Background The government will<br />
An increased expansion of wind power<br />
To the extent that suitable locations can be found,<br />
onshore wind turbines are far cheaper than offshore<br />
wind turbines <strong>and</strong> most other RE technologies. Due to<br />
technological development <strong>and</strong> rising electricity prices, it<br />
is expected that wind power in the long term will be able<br />
to compete with conventional electricity production, <strong>and</strong><br />
that subsidies for onshore wind turbines can therefore<br />
gradually be phased out.<br />
The majority of existing onshore turbines are more than<br />
ten years old <strong>and</strong> will most likely be scrapped before<br />
2020. The need to designate more locations suitable for<br />
new <strong>and</strong> larger turbines is therefore great. In order to<br />
cater for the technological development of new turbines,<br />
it will also be necessary to designate suitable l<strong>and</strong> where<br />
the wind turbine industry can test <strong>and</strong> demonstrate new<br />
turbines.<br />
Future wind turbines will increasingly have to be placed<br />
offshore, since there are only a limited number of suitable<br />
locations available onshore. The potential for offshore<br />
wind turbines is huge in Denmark. In order to promote<br />
technological development of offshore wind turbines, it is<br />
necessary, that newly developed turbines can be erected<br />
<strong>and</strong> operated on a continuous basis, preferably closer<br />
to the coast than previously. This will also provide opportunities<br />
for the general public, private organisations,<br />
municipalities etc. to be involved in the projects.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
• Call for tenders for a 600MW offshore wind farm at<br />
Kriegers Flak. Kriegers Flak can be realised as a joint<br />
project between Denmark <strong>and</strong> Germany (<strong>and</strong> possibly<br />
also Sweden) with expected operationalisation<br />
2018-2020<br />
• Call for tenders for smaller offshore wind turbine<br />
installations totalling 400MW closer to the coast<br />
than current wind farms. This will enable testing <strong>and</strong><br />
demonstration of new turbines, foundations etc., as<br />
well as sites for conventional wind mills, up to 2020.<br />
Suitable locations will be found through a screening<br />
process<br />
• Improve tendering procedures for offshore wind<br />
farms to reduce the costs of expansion <strong>and</strong> prepare<br />
the basis for offshore wind turbine expansion decisions<br />
in the period after 2020<br />
• As part of a general analysis of subsidy systems examine<br />
how subsidies for onshore turbines <strong>from</strong> 2014<br />
can be designed most appropriately, so that they are<br />
adjusted to rising electricity prices <strong>and</strong> technological<br />
development<br />
• Support continued municipal planning for new onshore<br />
wind turbines <strong>and</strong> at the same time look more<br />
closely at planning tools for onshore wind turbines.<br />
Up to 2020, in combination with other external conditions,<br />
this is expected to contribute to new turbines<br />
totalling a capacity of 1800MW. This is 500MW more<br />
than expected so far<br />
• Analyse the opportunities for reducing the distance<br />
requirements for wind turbines placed along roads<br />
<strong>and</strong> railways with a view to better use of locations in<br />
such areas<br />
• Commission a strategic environmental assessment<br />
with a view to both call for tenders on nine<br />
state-owned l<strong>and</strong> plots for the erection of onshore<br />
wind turbines, <strong>and</strong> to assist municipalities with wind<br />
turbine planning<br />
• Designate l<strong>and</strong> for testing prototypes <strong>and</strong> ‘series 0’<br />
wind turbines<br />
• In cooperation with industry, continue the wind<br />
turbine secretariat, including the mobile wind turbine<br />
task force, which assists municipalities with wind<br />
turbine planning.
A greater use of biomass<br />
Background The government will<br />
Biomass has the potential to replace large amounts of<br />
<strong>coal</strong> <strong>and</strong> natural <strong>gas</strong> cost-effectively in the relatively short<br />
term. In the long term, conversion <strong>from</strong> fossil fuels to<br />
renewable energy outside Denmark can lead to pressure<br />
on biomass resources <strong>and</strong> thus rising prices, <strong>and</strong> possible<br />
challenges to security of supply. On the other h<strong>and</strong>,<br />
it must be anticipated that the technologies used in the<br />
production of biomass <strong>and</strong> biofuels will undergo developments<br />
which can lower the price of energy produced<br />
<strong>from</strong> biomass.<br />
At present, the majority of large-scale power plants in<br />
Denmark can use biomass for part of their production,<br />
while many natural <strong>gas</strong> fired small-scale plants have<br />
long had an ambition to convert to biomass-based heat<br />
production.<br />
The largest Danish cities have ambitious climate plans<br />
<strong>and</strong> have expressed their wish to make heating <strong>from</strong><br />
large-scale plants carbon-neutral within the next 20<br />
years. The government will therefore allow for a greater<br />
degree of freedom of contract between producers <strong>and</strong><br />
buyers of district heating in the larger cities. Furthermore,<br />
the government will remove the restrictions on the free<br />
choice of fuel for smaller plants outside the ETS sector,<br />
so that these plants can replace natural <strong>gas</strong> with<br />
biomass.<br />
By removing these restrictions <strong>and</strong> introducing the free<br />
choice of fuel, the government can also contribute to<br />
lower heating prices in the district heating areas involved.<br />
This will especially benefit the open-field plants, some<br />
of which today charge very high prices. The free choice<br />
of fuel will also make for greater use of local biomass<br />
resources by smaller plants, for instance straw <strong>and</strong> chippings,<br />
to the extent that this is profitable.<br />
• Change the provisions of the Danish Heat Supply<br />
Act, so that the settlement of prices on heating<br />
produced <strong>from</strong> biomass at large-scale CHP plants<br />
will no longer be limited by non-profit regulation. In<br />
this way, producers <strong>and</strong> buyers of CHP can agree<br />
on a price by which they share the tax benefits of the<br />
transition to biomass<br />
• Allow plants of up to 20MW a free choice of fuel,<br />
which will enable a number of natural <strong>gas</strong> fired plants<br />
to convert to production based on biomass<br />
• Carry out an analysis of the use of biomass for<br />
energy-related purposes in Denmark. The analysis<br />
will focus on whether the right framework conditions<br />
for efficient <strong>and</strong> environmentally sustainable use of<br />
biomass resources are in place. The analysis will<br />
prepare a long-term strategy for the use of biomass<br />
resources for energy purposes <strong>and</strong> will draw on<br />
experience <strong>from</strong> other counties<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
33
Initiatives in the strategy<br />
34<br />
Background The government will<br />
A solid foundation for bio<strong>gas</strong> expansion<br />
Agriculture will play a key role as a green energy supplier<br />
in the transition to fossil fuel independence. In accordance<br />
with the national Green Growth agreement, the<br />
government wants Denmark to aim for the exploitation<br />
of up to 50% of livestock manure for green energy. There<br />
are large unexploited bio<strong>gas</strong> resources, especially in<br />
the form of livestock manure in agriculture. These can<br />
replace natural <strong>gas</strong>, <strong>oil</strong> <strong>and</strong> <strong>coal</strong> for energy purposes.<br />
Greater use of livestock manure will also benefit the<br />
aquatic environment <strong>and</strong> will contribute to reducing<br />
emissions of greenhouse <strong>gas</strong>es <strong>from</strong> agriculture, which<br />
in turn will contribute significantly to meeting Denmark’s<br />
international climate commitments.<br />
The government is monitoring closely the expansion of<br />
bio<strong>gas</strong> <strong>and</strong> has agreed with the Danish People’s Party<br />
to take stock of these developments at the end of 2012,<br />
see the Green Growth agreement. However, even now<br />
the government is presenting a package of initiatives to<br />
support realisation of a 50% use of livestock manure by<br />
2020, whilst taking into account the effects of introducing<br />
the free choice of fuel.<br />
The bio<strong>gas</strong> package proposes raising the start-up aid<br />
<strong>and</strong> introducing a new subsidy system, which will provide<br />
subsidies for a greater variety of uses. It is the government’s<br />
ambition that a greater share of the subsidies<br />
be paid directly to the bio<strong>gas</strong> plants, so that the plants<br />
may receive subsidies for all bio<strong>gas</strong> production irrespective<br />
of ultimate use. Bio<strong>gas</strong> plants will therefore be able<br />
to choose whether to use bio<strong>gas</strong> in their own processes<br />
or sell it off to the highest bidder. In the longer term this<br />
will help improve financial performance in the bio<strong>gas</strong><br />
sector <strong>and</strong> it will enhance the use of bio<strong>gas</strong> for a greater<br />
variety of purposes, e.g. in the natural <strong>gas</strong> grid <strong>and</strong> in<br />
industry. In order to cover the costs of livestock manure<br />
separation, the government will moreover introduce a<br />
subsidy for bio<strong>gas</strong> <strong>from</strong> livestock manure.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
• Introduce a subsidy of DKK 27/GJ for bio<strong>gas</strong> production<br />
<strong>from</strong> 2012. The subsidy will be paid to the<br />
bio<strong>gas</strong> plant regardless of how the plant uses the<br />
bio<strong>gas</strong><br />
• Retain current levels for preferential treatment of<br />
bio<strong>gas</strong> in CHP production, <strong>and</strong> for the average plant<br />
this will correspond to approximately DKK 75/GJ,<br />
including the bio<strong>gas</strong> production subsidy, in 2012<br />
• Introduce a subsidy for bio<strong>gas</strong> in the natural <strong>gas</strong> grid<br />
on equal terms with CHP production, entailing a total<br />
subsidy of DKK 75/GJ, including the bio<strong>gas</strong> production<br />
subsidy, in 2012<br />
• Introduce a subsidy for bio<strong>gas</strong> in industry <strong>and</strong> transport<br />
of net DKK 12/GJ, so that the total subsidy for<br />
bio<strong>gas</strong> in industry <strong>and</strong> transport is raised <strong>from</strong> 2012<br />
by net DKK 39/GJ, including the bio<strong>gas</strong> production<br />
subsidy<br />
• Introduce an additional subsidy of DKK 22.5/GJ for<br />
bio<strong>gas</strong> <strong>from</strong> livestock manure. The subsidy will be<br />
reduced in line with natural <strong>gas</strong> prices<br />
• Increase the aid <strong>from</strong> a start-up construction fund<br />
<strong>from</strong> 20% to 30%<br />
• Set aside funds of DKK 25 million in 2012 to safeguard<br />
the required expansion of the bio<strong>gas</strong> infrastructure<br />
with a view to alleviating any negative consequences<br />
for existing bio<strong>gas</strong> plants in connection<br />
with the introduction of the free choice of fuel<br />
• Allow, on a voluntary basis, changing <strong>from</strong> fixed electricity<br />
settlement to an electricity price supplement for<br />
100% bio<strong>gas</strong>-based plants.
Background The government will<br />
A highly efficient energy consumption<br />
A cost-effective realisation of the goal of Danish fossil-fuel<br />
independence requires considerable energy efficiency<br />
improvements in the various sectors. In many cases,<br />
energy efficiency is cheaper than the otherwise required<br />
renewable energy expansion, both in the short, medium<br />
<strong>and</strong> long term.<br />
The energy efficiency improvements of companies must<br />
be enhanced. Although many companies have already<br />
carried out large energy efficiency improvements, considerable<br />
cost-effective potential still exists for reducing<br />
energy consumption in the different business sectors<br />
through energy efficiency improvements.<br />
The EU plays a key role in the promotion of energy efficiency<br />
improvements. Greater <strong>and</strong> cheaper efficiency<br />
improvements can be obtained through concerted<br />
efforts in a number of sectors. This applies not least to<br />
appliances, because the Danish market is too small to<br />
efficiently push the development of more energy efficient<br />
products. Concerted efforts will also mean equal terms<br />
of competition for producers <strong>and</strong> consumers.<br />
<strong>Energy</strong> consumption in the public sector is relatively<br />
limited compared with other sectors, but the public sector<br />
has a special obligation to also contribute its share,<br />
as ever stricter efficiency requirements are placed on the<br />
business community <strong>and</strong> private households.<br />
• Target the saving obligations of energy companies<br />
towards companies in general. These efforts must<br />
cover energy efficiency improvement as well as<br />
conversion away <strong>from</strong> <strong>oil</strong> <strong>and</strong> natural <strong>gas</strong>. The obligations<br />
of energy companies will be raised by 50%<br />
<strong>from</strong> 2013 <strong>and</strong> by 75% in 2017-2020. Efforts will be<br />
financed via net tariffs<br />
• Push for the EU to achieve at least 20% improvement<br />
in energy efficiency by 2020 by means of instruments<br />
<strong>and</strong> policies at EU level <strong>and</strong> at national level. This will<br />
take place through e.g.:<br />
• more requirements, <strong>and</strong> more ambitious requirements,<br />
for the energy efficiency of appliances <strong>and</strong><br />
products; <strong>and</strong> tightening of the requirements for<br />
efficiency <strong>and</strong> labelling of appliances <strong>and</strong> products<br />
in connection with upcoming revisions of the<br />
Ecodesign <strong>and</strong> <strong>Energy</strong> Labelling Directives<br />
• push for the future framework directive on energy<br />
efficiency to be ambitious <strong>and</strong> action-based<br />
• push for a further tightening of the <strong>Energy</strong> Performance<br />
of Buildings Directive<br />
• push for a higher level of ambition among businesses<br />
in the EU with regard to energy efficiency<br />
• Enhance public sector energy savings efforts <strong>from</strong><br />
2012:<br />
• before the end of 2011, a proposal will be presented<br />
to replace the existing requirements for<br />
a 10% reduction in energy consumption by the<br />
state, relative to 2006<br />
• in 2012, when the current agreement on energy<br />
savings with Local Government Denmark<br />
<strong>and</strong> Danish Regions elapses, the government’s<br />
budget agreements with municipalities <strong>and</strong> regions<br />
will include voluntary agreements on energy<br />
consumption in buildings<br />
• Continue the efforts by the Knowledge Centre for<br />
<strong>Energy</strong> Savings in Buildings.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
35
Initiatives in the strategy<br />
Efficiency improvements in<br />
households <strong>and</strong> in buildings<br />
36<br />
Background The government will<br />
Buildings have long life spans; up to 100 years or more.<br />
In addition, buildings are typically only renovated at 30-<br />
40 year intervals, <strong>and</strong> perhaps only once before <strong>2050</strong>.<br />
Therefore, it is vital to choose future-proof solutions<br />
when constructing new buildings <strong>and</strong> when renovating<br />
old ones, so as to realise the full potential for savings.<br />
Denmark currently has some of the strictest st<strong>and</strong>ards<br />
for the energy performance of new buildings, <strong>and</strong> the<br />
government has agreed to tighten these st<strong>and</strong>ards by<br />
at least 75% no later than 2020. The government has<br />
moreover stepped up preparation of a voluntary ‘low<br />
energy rating 2020’, expected to be announced in spring<br />
2011 However, new buildings on a yearly basis only account<br />
for 1% of the total existing building stock. Accordingly,<br />
increased efforts will be directed towards existing<br />
buildings.<br />
Existing technologies <strong>and</strong> solutions provide great opportunities<br />
to reduce the energy consumption of existing<br />
buildings through improved insulation, replacement of<br />
inefficient windows etc. If the improvements are implemented<br />
in connection with ongoing maintenance, heating<br />
consumption in existing buildings can be reduced<br />
by approximately 50% of consumption levels today at a<br />
reasonable cost. Realising these opportunities calls for a<br />
combination of ambitious st<strong>and</strong>ards which must be met<br />
in connection with renovation, replacement, etc. <strong>and</strong> assistance<br />
to carry out these projects.<br />
Along with a reduction in energy consumption in buildings,<br />
the buildings which today are heated by <strong>oil</strong> <strong>and</strong><br />
natural <strong>gas</strong> must undergo a fuel shift. This conversion<br />
should take place when existing heating installations<br />
wear out. In densely populated areas, district heating<br />
may be exp<strong>and</strong>ed, but for a large number of existing <strong>oil</strong><br />
<strong>and</strong> <strong>gas</strong> furnaces, a heat pump, possibly in combination<br />
with solar heating, will however be the most cost-effective<br />
alternative.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
• Target the saving obligations of energy companies<br />
towards renovation of buildings <strong>and</strong> conversion of <strong>oil</strong><br />
<strong>and</strong> natural <strong>gas</strong> heating. Obligations will moreover be<br />
increased by 50% <strong>from</strong> 2013 <strong>and</strong> by 75% in 2017-<br />
2020. Efforts will be financed via net tariffs<br />
• Future-proof the minimum efficiency st<strong>and</strong>ards for<br />
building components (windows, insulation etc.) which<br />
have to be met when renovating buildings, relative<br />
to future challenges <strong>and</strong> expected energy prices.<br />
Whether new components are to be included will be<br />
examined. The st<strong>and</strong>ards will be determined by taking<br />
into account the financial situation of home owners,<br />
a healthy indoor climate <strong>and</strong> freedom of architectural<br />
expression. Initiatives which can ensure greater<br />
compliance with the st<strong>and</strong>ards will be considered<br />
• Convert heating by <strong>oil</strong>, <strong>and</strong> eventually also natural<br />
<strong>gas</strong> heating, to district heating, heat pumps <strong>and</strong><br />
other renewable forms of energy. This will be through:<br />
• a ban on installing <strong>oil</strong> furnaces in existing buildings<br />
<strong>from</strong> 2017, <strong>and</strong> a ban on installing <strong>oil</strong> <strong>and</strong><br />
natural <strong>gas</strong> furnaces in new buildings <strong>from</strong> 2012.<br />
Derogations may be allowed in cases where no<br />
suitable alternatives are available<br />
• market-promotion of initiatives for energy-efficient<br />
heat pumps <strong>and</strong> solar heating, including labelling<br />
schemes, certification schemes, package solutions<br />
<strong>and</strong> ESCO models<br />
• rules on compensation for <strong>gas</strong> companies<br />
converting <strong>from</strong> individual natural <strong>gas</strong> to district<br />
heating<br />
• a model <strong>and</strong> timetable for the phase-out of<br />
natural <strong>gas</strong> furnaces, taking account of the need<br />
for <strong>gas</strong> for production purposes in industry <strong>and</strong><br />
potentials for utilising bio<strong>gas</strong><br />
• Incorporate a ‘low-energy rating 2020’ in the building<br />
regulations with a view to promoting the establishment<br />
of new buildings with very low energy consumption.
Background The government will<br />
A cohesive <strong>and</strong> intelligent energy system<br />
Electricity will be the dominant energy carrier in the<br />
future energy system with rapidly increasing electricity<br />
consumption. Moreover, wind power’s share of electricity<br />
production will grow. Against this backdrop, flexible consumption<br />
will be important for operation of the system.<br />
This will require enhancing cross-border transmission<br />
capacity considerably, in order to ensure efficient<br />
incorporation of wind power in particular into the Danish<br />
electricity supply system.<br />
Furthermore, an intelligent system with ongoing temporal<br />
adjustments between production <strong>and</strong> consumption of<br />
electricity can provide for even greater flexibility. In this<br />
context, increased use of electricity b<strong>oil</strong>ers for district<br />
heating production, flexible electricity consumption in industry,<br />
<strong>and</strong> flexible recharging of electric cars will be key.<br />
This will reduce the need for investments in production<br />
capacity, however there is still the need to develop<br />
cheaper solutions for intelligent electricity consumption in<br />
a number of areas, <strong>and</strong> a large-scale roll-out is therefore<br />
not appropriate at present.<br />
Gas will come to play an important role in a future with<br />
fossil fuel independence. For example, bio<strong>gas</strong>-fired CHP<br />
plants can serve to balance intermittent wind power<br />
production. Hence, an up-to-date <strong>gas</strong> infrastructure for<br />
the use of bio<strong>gas</strong> <strong>and</strong> other renewable <strong>gas</strong>ses will be<br />
needed, e.g. <strong>gas</strong> formed <strong>from</strong> <strong>gas</strong>ification of biomass or<br />
<strong>from</strong> electricity.<br />
• Establish new international electricity transmission<br />
capacity in the form of a transmission line to Germany<br />
<strong>and</strong> possibly also to Sweden in connection with<br />
the future offshore wind farm at Kriegers Flak. A new<br />
type of technology will be used providing new operational<br />
experience. Ultimately, this will achieve better<br />
connections between electricity markets. This project<br />
is supported financially by the EU with approximately<br />
DKK 1.1 billion<br />
• Analyse the need to exp<strong>and</strong> international transmission<br />
lines in order to achieve a socio-economically<br />
optimal expansion as well as ensure the necessary<br />
reserves/back-up in an electricity system with a large<br />
share of wind power<br />
• Work for an agreement with the distribution companies<br />
to install intelligent electricity meters when<br />
electricity consumers install heat pumps, or recharging<br />
stations for electric cars. Furthermore, the limit<br />
for installation of intelligent meters will be lowered in<br />
2013 <strong>from</strong> 100,000 kWh to 50,000 kWh annual consumption.<br />
The government will also ask the distribution<br />
companies to replace all electricity meters which<br />
are replaced after 2015 by an intelligent electricity<br />
meter<br />
• Continue to encourage the electricity sector to<br />
perform demonstration projects with dynamic tariffs<br />
in specific distribution grids <strong>and</strong> prepare a strategy<br />
for the promotion of smart grids in Denmark, <strong>and</strong> in<br />
this connection determine investment needs <strong>and</strong> a<br />
financing model<br />
• Analyse regulation of the <strong>gas</strong> infrastructure in future<br />
years in order to ensure optimal use <strong>and</strong> maintenance<br />
of the existing <strong>gas</strong> infrastructure; both in the<br />
transitional phase, while natural <strong>gas</strong> still plays a role,<br />
<strong>and</strong> in the future, when bio<strong>gas</strong> <strong>and</strong> other renewable<br />
<strong>gas</strong>ses have taken over<br />
• Work for a strengthened grid infrastructure in the<br />
EU in order to ensure a well-functioning electricity<br />
market.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
37
Initiatives in the strategy<br />
A transition to green energy<br />
in the transport sector<br />
38<br />
Background The government will<br />
The transport sector accounts for approximately onethird<br />
of the total use of fossil fuels <strong>and</strong> is today almost<br />
fully dependent on fossil fuels. The transport sector will<br />
therefore have to go through a radical transition before<br />
<strong>2050</strong>. This transition will depend extensively on international<br />
technological developments within the field, as<br />
currently there are no alternatives to fossil fuels which are<br />
competitive in terms of technology <strong>and</strong> price. However,<br />
several promising technologies are emerging, with for<br />
example biomass <strong>and</strong> electricity. At the same time,<br />
alternative transport technologies are showing a clear<br />
tendency towards falling costs.<br />
In the short term, increased use of biofuels is expected,<br />
<strong>and</strong> it is anticipated that improved fuel efficiency in traditional<br />
combustion engines will play a key role. In the long<br />
term, much of the transition to fossil fuel independence<br />
in the transport sector will probably have to be based on<br />
more electric power. Electric power will moreover represent<br />
a huge energy efficiency improvement, as electric<br />
motors are far more energy efficient than combustion<br />
engines.<br />
Transition in the transport sector will firstly have to be<br />
promoted by establishing the required framework as well<br />
as an infrastructure in Denmark <strong>and</strong> in the EU, which<br />
can ensure the initial transition <strong>and</strong> a basis for building<br />
experience. When the technologies have achieved sufficient<br />
technological <strong>and</strong> price maturity, the subsequent<br />
phases of transition will have to pave the way for a<br />
broader roll-out of, as well as a large-scale transition to,<br />
these technologies. The work to establish the required<br />
framework <strong>and</strong> infrastructure is already well under way<br />
in Denmark, e.g. the government has agreed to exempt<br />
electric cars <strong>from</strong> the vehicle registration fee <strong>and</strong> car tax<br />
up to <strong>and</strong> including 2015.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
• Carry out a technology assessment in 2011 <strong>and</strong><br />
subsequently every three years in order to ensure the<br />
right framework for new technologies to support the<br />
targets for reducing greenhouse <strong>gas</strong> emissions <strong>from</strong><br />
the transport sector in the short term up to 2020,<br />
<strong>and</strong> in the long term up to <strong>2050</strong><br />
• Secure a requirement for 10% biofuels by 2020<br />
• Push in the EU for more comprehensive sustainability<br />
requirements for first generation biofuels, <strong>and</strong> the option<br />
to prioritise second generation biofuels<br />
• Establish a fund of DKK 25 million to provide state<br />
co-financing for the establishment of recharging stations<br />
for electric cars in order to kick start development<br />
in the area <strong>and</strong> design appropriate regulation<br />
• Push in the EU for the promotion of electric cars,<br />
amongst other things through enhanced harmonisation<br />
<strong>and</strong> st<strong>and</strong>ardisation of technologies for electric<br />
cars; <strong>and</strong> push for the establishment of a car<br />
recharging infrastructure throughout the EU, which is<br />
coordinated with the regulation of intelligent infrastructure<br />
• Push in the EU for more intensive research <strong>and</strong><br />
development efforts within green transport technologies;<br />
<strong>and</strong> for tighter requirements for the energy<br />
efficiency <strong>and</strong> carbon emissions of cars.
Background The government will<br />
An energy system with appropriate<br />
financial incentives<br />
A cost-effective transition to fossil fuel independence<br />
requires financial incentives, which as far as possible<br />
are uniform across different sectors of society. This will<br />
ensure the expansion of the renewable energy technologies<br />
that are the most competitive under current world<br />
market prices for fossil fuels, CO2 emissions <strong>and</strong> renewable<br />
energy.<br />
The government will therefore analyse the existing subsidy<br />
<strong>and</strong> tax system in the energy <strong>and</strong> transport sectors<br />
<strong>and</strong> examine the consequences of gradually increasing<br />
the taxes on fossil fuels. The dual purpose is to ensure<br />
government revenues, <strong>and</strong> thus the basis for continued<br />
welfare, <strong>and</strong> at the same time reduce the use of fossil<br />
fuels with cost-effective incentives. Tax-related issues<br />
with relevance for heat production, e.g. excess heat, will<br />
be examined in connection with the analysis.<br />
In light of the uncertainties linked to technological<br />
development <strong>and</strong> fuel prices, the results of efforts will<br />
be monitored systematically <strong>and</strong> they will be subject to<br />
regular evaluation.<br />
• Carry out regular evaluation of the effect of instruments<br />
deployed in order to ensure adequate progress<br />
towards the goal of fossil fuel independence<br />
<strong>and</strong> to ensure cost-effectiveness in overall efforts,<br />
including developing an analysis tool which can help<br />
clarify security of supply issues<br />
• Carry out an evaluation of overall efforts every four<br />
years<br />
• Carry out an examination of the subsidy <strong>and</strong> tax system<br />
in order to assess the need for adjustments of<br />
the existing system. This should be seen in the context<br />
of Denmark’s international climate <strong>and</strong> energy<br />
commitments as well as the objectives for fossil fuel<br />
independence in the strategy, <strong>and</strong> the public budget<br />
• Establish an economic model for use in the energy<br />
sector, in order to improve the basis for performing<br />
socio-economic analyses within climate <strong>and</strong> energy.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
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Initiatives in the strategy<br />
A transition which creates<br />
green growth through research,<br />
development, demonstration<br />
<strong>and</strong> preparation for market<br />
40<br />
Background The government will<br />
In a number of areas development of more efficient <strong>and</strong><br />
cost-effective energy technologies is required. Strong efforts<br />
are therefore needed in research, development <strong>and</strong><br />
demonstration (RD&D) in the energy area.<br />
Enhanced energy research initiatives also support the<br />
possibilities of the Danish energy <strong>and</strong> climate sector in<br />
the growing international market for green technology by<br />
enabling large-scale demonstration <strong>and</strong> access to test<br />
environments.<br />
With the Erhvervsklimastrategien (climate strategy for<br />
companies), the government improved the framework<br />
conditions for Danish clean tech companies, e.g.<br />
through the establishment of Green Labs <strong>and</strong> through<br />
the market maturity efforts of the Innovation Foundation.<br />
In overall terms in 2010, the government ensured for<br />
instance more than DKK 1.5 billion for RD&D <strong>and</strong> market<br />
preparation of new green solutions to make them more<br />
profitable on market terms.<br />
Further focus <strong>and</strong> coordination of the allocations for energy<br />
technology (RD&D) is needed. Danish research <strong>and</strong><br />
development cannot lead the way in all green technology<br />
areas. It is important that efforts are more targeted <strong>and</strong><br />
support the focus areas in <strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong>.<br />
Therefore, the government will identify <strong>and</strong> assess<br />
energy-technology RD&D initiatives, in cooperation with<br />
relevant players, in order to identify areas where strategic<br />
support for research, development <strong>and</strong> demonstration<br />
has the greatest societal value. On the basis of such an<br />
assessment, a number of specific “flagships” could be<br />
established, underpinning the robust focus areas in <strong>Energy</strong><br />
<strong>Strategy</strong> <strong>2050</strong> as well as current Danish commercial<br />
strengths.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
• Undertake a strategic review of the public research,<br />
development <strong>and</strong> demonstration initiatives in the<br />
climate <strong>and</strong> energy area in order to support the transition<br />
to fossil fuel independence as well as the needs<br />
of the business community. Ways to improve coordination<br />
<strong>and</strong> interaction between relevant programmes<br />
<strong>and</strong> councils will also be identified<br />
• Prioritise a doubling of the funds in the EU’s future<br />
budget for research, development <strong>and</strong> demonstration<br />
up to 2020 in the energy <strong>and</strong> climate change areas,<br />
particularly for renewable energy, smart grids <strong>and</strong><br />
energy efficiency<br />
• Enter into partnerships with private enterprises,<br />
research institutions <strong>and</strong> others, where this can<br />
contribute to developing, testing, <strong>and</strong> preparing for<br />
market of Danish cleantech solutions, e.g. wind solutions<br />
<strong>and</strong> bio-based products<br />
• Actively support the establishment of larger test environments<br />
for green solutions in Denmark such as the<br />
wind turbine test centre at Østerild. The large, green<br />
support programmes such as the EUDP, Green Labs<br />
<strong>and</strong> the Innovation Foundation will be supplemented<br />
by partnerships or additional support for setting up<br />
more specific testing grounds such as “Samsø as a<br />
fossil fuel free isl<strong>and</strong>”<br />
• Present an overall plan for test turbines<br />
• Carry out a series of technology assessments in<br />
collaboration with experts <strong>from</strong> the business community<br />
<strong>and</strong> research in order to support a cost<br />
effective framework for using renewable energy. The<br />
technology assessments will focus on a wide array of<br />
technology areas<br />
• Investigate the need <strong>and</strong> opportunities for ensuring<br />
sufficient recruitment of university graduates <strong>and</strong><br />
researchers into the green area.
Ambitious endeavours for<br />
a global transition<br />
Background The government will<br />
Security of energy supply is best achieved when all<br />
countries cooperate to minimise <strong>and</strong> make the consumption<br />
of scarce resources more efficient. Similarly,<br />
only global action can solve the climate challenge. Most<br />
countries have submitted reduction initiatives to the<br />
UNFCCC. Enhanced global reduction efforts are required<br />
to meet the climate challenge <strong>and</strong> bring about greater<br />
focus on efficient <strong>and</strong> innovative solutions which can realise<br />
reduction commitments <strong>and</strong> develop new solutions<br />
to adapt countries to climate impacts.<br />
At the same time, such a transition to a global green<br />
economy will create a significant international economic<br />
growth potential; a potential <strong>from</strong> which Denmark can<br />
also benefit through exports of Danish green solutions.<br />
In addition, if other countries also implement stricter<br />
requirements for their industry <strong>and</strong> businesses, the risk<br />
of impairing the competitiveness of the most ambitious<br />
countries will be reduced.<br />
Therefore, Denmark will push for a global green transition<br />
in international forums. Further to this, the government<br />
will work to establish a Global Green Growth Forum<br />
to create an annual global forum for dialogue between<br />
leading international politicians, businesses, experts<br />
<strong>and</strong> investors on the transition to a global green growth<br />
economy. The main themes will be the role of the business<br />
community in the green transition, financing green<br />
growth, <strong>and</strong> the political framework conditions for green<br />
growth within sectors such as transport, energy <strong>and</strong><br />
water. The initiative is to contribute to the development<br />
of specific solutions <strong>and</strong> responses to the global growth<br />
challenges <strong>and</strong> also to help maintain <strong>and</strong> enhance Denmark’s<br />
br<strong>and</strong> in the green area.<br />
• Work in international forums such as the UN, the<br />
OECD, the Rio+20 Conference, the International<br />
<strong>Energy</strong> Agency, <strong>and</strong> the Clean <strong>Energy</strong> Ministerial etc.<br />
for:<br />
• ambitious, global efforts for the climate. Primarily<br />
by having countries’ reductions efforts implemented<br />
<strong>and</strong> enhanced through negotiations within the<br />
UNFCCC as well as through expansion of the<br />
regional allowances trading systems, enhancing<br />
the global carbon market through improvements<br />
in the institutional framework for international <strong>and</strong><br />
national project-based reductions after 2012,<br />
<strong>and</strong> by enhancing environmental integrity through<br />
requirements <strong>and</strong> st<strong>and</strong>ards for utilising climate<br />
credits in the EU <strong>and</strong> UN after 2012<br />
• promotion of a green growth agenda, for example<br />
Green Economy is a main theme for the Rio+20<br />
conference in 2012 on sustainable utilisation<br />
of natural resources in a social <strong>and</strong> economic<br />
context<br />
• energy efficiency <strong>and</strong> transition to clean <strong>and</strong><br />
renewable energy such as ”smart grids”, electric<br />
cars etc.<br />
• phase-out of subsidies etc. for fossil fuels<br />
• Work to establish a Global Green Growth Forum<br />
• Support green transition in developing countries, not<br />
least the very poorest, in accordance with the countries’<br />
economic <strong>and</strong> social development goals, in<br />
particular through conversion of the energy sector to<br />
more renewable energy <strong>and</strong> greater energy efficiency<br />
of the transport sector <strong>and</strong> other relevant sectors.<br />
This involves developing reduction <strong>and</strong> adaptation<br />
strategies, including methods to calculate emissions.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
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<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.
Background The government will<br />
An EU independent of fossil fuels<br />
An efficient step for both Danish <strong>and</strong> global transition<br />
would be if the entire EU were to move towards fossil<br />
fuel independence.<br />
In May 2010 the government sent a proposal to the<br />
European Commission to contribute to the preparation<br />
of a new European energy policy for the short, medium<br />
<strong>and</strong> long terms.<br />
The Danish government believes, that the energy<br />
agenda should be incorporated in all relevant EU policy<br />
areas: research, development, transport, agriculture,<br />
foreign affairs <strong>and</strong> the EU budget; <strong>and</strong> that EU energy<br />
policy <strong>and</strong> energy research should be given higher priority<br />
financially.<br />
In May 2010, the European Commission highlighted a<br />
number of advantages in increasing the greenhouse<br />
<strong>gas</strong> reduction target for 2020 <strong>from</strong> the current 20% to<br />
30% compared with 1990, including the advantage of<br />
stronger incentives for energy savings <strong>and</strong> more use of<br />
renewable energy throughout the EU. This would be a<br />
strong signal globally, but it would also contribute specifically<br />
to less dependence on fossil fuels <strong>and</strong> a better<br />
climate. Of course it should be done in such a way as to<br />
ensure employment, competitiveness <strong>and</strong> a fair burden<br />
sharing.<br />
• Promote a long-term vision for an EU independent<br />
of fossil fuels as a starting point for a strengthened<br />
European energy policy, including time perspectives<br />
<strong>and</strong> possible milestones within a socio-economically<br />
sustainable framework<br />
• Endeavour to raise the common EU greenhouse <strong>gas</strong><br />
emissions 2020 target <strong>from</strong> 20% to 30% compared<br />
with the 1990 level in a way that ensures employment,<br />
competitiveness <strong>and</strong> fair burden sharing<br />
• Urge the EU to adopt an ambitious long-term<br />
strategy to support a low-carbon energy supply <strong>and</strong><br />
greater fossil fuel independence in the transport sector<br />
• In the EU, prioritise a doubling of the funds for<br />
research, development <strong>and</strong> demonstration in the<br />
energy area by 2020 compared with the todays level,<br />
including a significant increase in the EU’s future<br />
budget, particularly for renewable energy, smart grids<br />
<strong>and</strong> energy efficiency<br />
• Push for the adoption of minimum st<strong>and</strong>ards for energy<br />
<strong>and</strong> CO2 taxes in the EU in connection with the<br />
revision of the EU <strong>Energy</strong> Tax Directive<br />
• Endeavour to develop EU’s energy infrastructure so<br />
that Denmark <strong>and</strong> EU member states can incorporate<br />
still larger amounts of renewable energy.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
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Initiatives in the strategy<br />
44<br />
Background The government will<br />
Reductions in agriculture’s emissions<br />
of greenhouse <strong>gas</strong>es in the long term<br />
The realisation of fossil fuel independence through initiatives<br />
in the energy <strong>and</strong> transport sectors will ensure that<br />
Denmark comes a long way towards reducing emissions<br />
of greenhouse <strong>gas</strong>es <strong>and</strong> meeting climate targets in<br />
the short <strong>and</strong> longer terms. However it is important that<br />
emissions are also reduced in other sectors.<br />
In addition to the energy <strong>and</strong> transport sectors, agriculture<br />
is the largest emitter of greenhouse <strong>gas</strong>es. Emissions<br />
of nitrous oxide <strong>and</strong> methane <strong>from</strong> agriculture have<br />
been showing significant falls over a number of years,<br />
partly because of limits on nitrogen emissions in the action<br />
plans for the aquatic environment. Today, agriculture<br />
accounts for 16% of total greenhouse <strong>gas</strong> emissions <strong>and</strong><br />
approximately one-third of greenhouse <strong>gas</strong> emissions for<br />
the non-ETS sectors.<br />
A number of initiatives to reduce greenhouse <strong>gas</strong> emissions<br />
<strong>from</strong> the sector have already been decided <strong>and</strong><br />
are being implemented. For example the Green Growth<br />
agreement for better conditions for using biomass <strong>and</strong><br />
bio<strong>gas</strong> for energy purposes is helping support farmers to<br />
supply green energy. The government’s proposed bio<strong>gas</strong><br />
package will also contribute to reducing emissions <strong>from</strong><br />
agriculture. In the future it is important, that Danish efforts<br />
stay in line with other countries to avoid unequal<br />
competition which will impact the competitiveness of<br />
Danish farmers.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
• Analyse long term opportunities to reduce emissions<br />
<strong>from</strong> agriculture as part of cost effective climate efforts<br />
• Promote a sustainable common EU agricultural<br />
policy, for example in relation to climate, so that<br />
agricultural policy can be used to promote climate<br />
friendly production forms, including innovative efforts<br />
<strong>and</strong> efforts targeted on shallow s<strong>oil</strong>, <strong>and</strong> to ensure<br />
common green terms for competition in the agricultural<br />
sector<br />
• Evaluate the pilot project <strong>and</strong> potential to establish a<br />
possible permanent scheme for national JI projects<br />
in 2011<br />
• Improve conditions for expansion of bio<strong>gas</strong> with the<br />
bio<strong>gas</strong> package.
Background The government will<br />
An efficient <strong>and</strong> environmentally sound<br />
utilisation of North Sea resources<br />
In recent years, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> production in the North Sea<br />
has been crucial for the Danish economy. Since 1995<br />
Denmark has had a surplus on its trading balance for <strong>oil</strong><br />
<strong>and</strong> <strong>gas</strong>, <strong>and</strong> up to 2009 government revenues <strong>from</strong> <strong>oil</strong><br />
<strong>and</strong> <strong>gas</strong> activities have corresponded to more than DKK<br />
250 billion in today’s prices.<br />
This has given economic leeway for more welfare <strong>and</strong> to<br />
the repayment of national debt. At the same time, <strong>oil</strong> <strong>and</strong><br />
<strong>gas</strong> activities have created economic growth <strong>and</strong> a large<br />
number of specialist jobs in <strong>oil</strong> companies, research,<br />
<strong>and</strong> not least in western Denmark, where there are more<br />
than 250 offshore-related companies in the Esbjerg area<br />
alone. This has provided experience <strong>and</strong> knowledge<br />
which could also be developed in connection with future<br />
green offshore activities.<br />
Oil production peaked in 2004, <strong>and</strong> it is expected to<br />
drop by 37% up to 2014 in relation to 2009. Although<br />
North Sea production has been falling in recent years,<br />
it has been estimated that there are still <strong>oil</strong> <strong>and</strong> <strong>gas</strong><br />
resources in the Danish subsurface to contribute to the<br />
economy.<br />
The technology of today only extracts approximately a<br />
quarter of the <strong>oil</strong> lying in the known fields. More effective<br />
exploitation of <strong>oil</strong> <strong>and</strong> <strong>gas</strong> resources as well as new<br />
discoveries could therefore provide government revenues<br />
<strong>and</strong> contribute to securing sound public finances<br />
whilst helping to cover the increasing global dem<strong>and</strong> for<br />
energy.<br />
• Secure a more transparent framework for using the<br />
existing infrastructure in order to improve possibilities<br />
to exp<strong>and</strong> economically marginal <strong>oil</strong> <strong>and</strong> <strong>gas</strong> occurrences<br />
• Implement a review of the framework for <strong>oil</strong> <strong>and</strong> <strong>gas</strong><br />
extraction for future tendering rounds <strong>and</strong> for the use<br />
of CO2 injection to improve extraction rates<br />
• Analyse the exploration potential in Denmark <strong>and</strong><br />
assess when, <strong>and</strong> on what terms, new exploration<br />
licences can be offered (7th round)<br />
• Promote a new phase of the Joint Chalk Research<br />
collaboration between Danish <strong>and</strong> Norwegian authorities<br />
<strong>and</strong> <strong>oil</strong> companies with a view to increasing<br />
<strong>oil</strong> extraction <strong>from</strong> chalk fields<br />
• Promote exploration for new <strong>oil</strong> <strong>and</strong> <strong>gas</strong> fields in<br />
deeper layers through a project led by the Geological<br />
Survey of Denmark <strong>and</strong> Greenl<strong>and</strong> (GEUS) in research<br />
collaboration with <strong>oil</strong> companies. The project<br />
will assess opportunities for new <strong>oil</strong>/<strong>gas</strong> finds <strong>and</strong><br />
reassess existing finds in deep layers<br />
• Negotiate with <strong>oil</strong> companies for a new action plan<br />
to replace the existing plan for more energy efficient<br />
extraction of <strong>oil</strong> <strong>and</strong> <strong>gas</strong> <strong>from</strong> the North Sea<br />
• Examine possibilities to improve <strong>and</strong> coordinate authority<br />
administration of <strong>oil</strong> <strong>and</strong> <strong>gas</strong> activities onshore<br />
• Analyse opportunities to secure recruitment for the <strong>oil</strong><br />
sector through education initiatives in the field of <strong>oil</strong><br />
<strong>and</strong> <strong>gas</strong><br />
• Negotiate a new environment action plan with the<br />
<strong>oil</strong> companies to secure lower environmental impact<br />
<strong>from</strong> <strong>oil</strong> <strong>and</strong> <strong>gas</strong> extraction in the North Sea <strong>and</strong><br />
evaluate <strong>and</strong> possibly revise the strategy for inspection<br />
by the Danish <strong>Energy</strong> Agency of safety <strong>and</strong><br />
health conditions in the North Sea.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
45
On<br />
4On<br />
the way towards fossil fuel independence by <strong>2050</strong> <strong>–</strong> effects <strong>and</strong> benefits of the government’s initiatives<br />
the way towards fossil fuel independence by <strong>2050</strong><br />
<strong>–</strong> effects <strong>and</strong> benefits of the government’s initiatives<br />
46<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
In addition to the benefits for the environment<br />
<strong>and</strong> climate <strong>from</strong> the new initiatives, the<br />
strategy will also provide Danish companies<br />
with new opportunities to exploit the global<br />
green growth potential.
The government’s strategy contains a wide range of<br />
initiatives to bring Denmark closer to its objective of<br />
an energy <strong>and</strong> transport system without fossil fuels by<br />
<strong>2050</strong>; initiatives which will also help meet the energy <strong>and</strong><br />
climate targets already set out in the short <strong>and</strong> medium<br />
term. The strategy will already have significant effects<br />
in the period 2011-2020, in the form of reduced use of<br />
fossil fuels, increased use of renewable energy, reduced<br />
energy consumption, cuts in greenhouse <strong>gas</strong> emissions<br />
<strong>and</strong> enhanced security of supply. With this strategy, the<br />
government is establishing a flexible framework for longterm<br />
efforts, but needless to say the transition will require<br />
further initiatives in the period after 2020 to realise the<br />
goal by <strong>2050</strong>.<br />
In addition to the benefits for the environment <strong>and</strong><br />
climate <strong>from</strong> the new initiatives, the strategy will also provide<br />
Danish companies with new opportunities to exploit<br />
the global green growth potential by ensuring stronger<br />
cohesion between innovation, production <strong>and</strong> sale of<br />
new technologies to the advantage of Danish exports.<br />
Phase-out of fossil fuels<br />
in the energy sector<br />
As appears <strong>from</strong> the government’s three tracks for the<br />
transition, the phase out of fossil fuels will take place at<br />
different rates. The transition will first be in the energy<br />
sector, whereas large-scale conversion of the transport<br />
sector is expected later, once the non-fossil based alternative<br />
fuels have become financially <strong>and</strong> technically more<br />
attractive.<br />
‘The largest contributions come <strong>from</strong> increased<br />
wind power, increased use of biomass <strong>and</strong><br />
energy efficiency<br />
The government’s new initiatives to improve energy efficiency<br />
<strong>and</strong> exp<strong>and</strong> renewable energy will already provide<br />
a significant reduction in the use of fossil fuels over the<br />
next ten years. With the initiatives the government is<br />
presenting, the use of fossil fuels in the energy sector will<br />
be cut by 33% by 2020 relative to the 2009 level. The<br />
greatest contribution to this reduction will come <strong>from</strong> the<br />
government’s initiatives to increase the use of biomass,<br />
bio<strong>gas</strong> <strong>and</strong> biofuels, exp<strong>and</strong> wind power <strong>and</strong> increase<br />
energy efficiency.<br />
400<br />
250<br />
0<br />
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020<br />
Without initiatives With new initiatives<br />
PJ<br />
350<br />
300<br />
Figure 4.1 Fossil fuel use in the energy sector 2009-2020<br />
(excluding transport, extraction <strong>and</strong> refining).<br />
Source: Danish <strong>Energy</strong> Agency<br />
The electricity sector in particular will see a very significant<br />
reduction in the use of fossil fuels. With the government’s<br />
new initiatives, the share of renewable energy<br />
will account for more than 60% of overall electricity<br />
consumption in 2020, against 29% in 2009. Wind power<br />
alone will cover more than 40% of electricity consumption<br />
in 2020, compared with just 19% in 2009. A high<br />
share of renewables in the electricity supply also implies<br />
electrification of an ever greater share of energy consumption<br />
for transport, heating <strong>and</strong> industrial processes.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
33% reduction<br />
47
On the way towards fossil fuel independence by <strong>2050</strong> <strong>–</strong> effects <strong>and</strong> benefits of the government’s initiatives<br />
Wind Biomass Fossil fuels Wind Biomass Fossil fuels<br />
Figure 4.2 Share of renewable energy in electricity production<br />
2009 <strong>and</strong> 2020. Source: Danish <strong>Energy</strong> Agency<br />
Lower <strong>oil</strong> consumption in<br />
the transport sector<br />
A substantial conversion of the transport sector to nonfossil<br />
alternatives will not happen within the next ten<br />
years. A substantial shift of this type is both technically<br />
<strong>and</strong> financially unrealistic in the short term. It is expected<br />
that the use of <strong>oil</strong> will stabilise within this decade,<br />
amongst other things because of greater use of biofuels<br />
<strong>and</strong> increased efficiency. A more efficient transport<br />
sector provides a sound basis for subsequent reductions<br />
in the transport sector’s use of <strong>oil</strong> as alternatives<br />
to transport powered by petrol <strong>and</strong> diesel become more<br />
competitive. A technology shift <strong>from</strong> <strong>oil</strong>-based transport<br />
to non-fossil alternatives is the challenge that will have to<br />
be dealt with in the next decades.<br />
48<br />
19%<br />
2009<br />
10%<br />
71%<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
42%<br />
250<br />
225<br />
200<br />
175<br />
PJ/year<br />
20%<br />
2020<br />
38%<br />
0<br />
1990 1995 2000 2005 2010 2015 2020<br />
Figure 4.3. The transport sector’s use of <strong>oil</strong> 1990-2020<br />
Source: Danish <strong>Energy</strong> Agency
On the way towards fossilfuel<br />
independence<br />
Total use of fossil fuels in Denmark, that is, the use of<br />
fossil fuels for energy, transport, <strong>and</strong> for extraction <strong>and</strong><br />
refining purposes, will be reduced by 18% by 2020,<br />
relative to 2009, due to greater use of biomass, wind, bio<strong>gas</strong><br />
<strong>and</strong> biofuels as well as increased energy efficiency.<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
PJ<br />
0<br />
2009<br />
2020<br />
Oil Gas Coal<br />
Other RE Wind Bio<strong>gas</strong> Biofuel Biomass<br />
Figure 4.4 Consumption of fossil fuels <strong>and</strong> RE in 2009 <strong>and</strong><br />
2020 (excluding extraction <strong>and</strong> refining)<br />
Source: Danish <strong>Energy</strong> Agency<br />
The government strategy entails ambitious<br />
efforts for the period up to 2020, but also<br />
points onwards to <strong>2050</strong><br />
The government’s strategy entails ambitious efforts for<br />
the period up to 2020, but also points onwards to <strong>2050</strong>.<br />
With considerable reductions in the use of fossil fuels in<br />
the energy sector, stabilisation of <strong>oil</strong> use in the transport<br />
sector, <strong>and</strong> a framework for future efforts, the government’s<br />
strategy is a huge step towards the target of<br />
phasing out fossil fuels completely by <strong>2050</strong>, see figure<br />
4.5. However, realising the goal by <strong>2050</strong> will require a<br />
continuation of existing efforts <strong>and</strong> implementation of<br />
new initiatives in the period after 2020.<br />
900<br />
800<br />
700<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
PJ/year<br />
0<br />
1990 2000 2010 2020 2030 2040 <strong>2050</strong><br />
Historical<br />
Without new initiatives With new initiatives<br />
Figure 4.5. Consumption of <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> natural<br />
<strong>gas</strong> 1990-<strong>2050</strong>. Source: Danish <strong>Energy</strong> Agency<br />
Phasing in renewable energy<br />
With the proposed initiatives, it is estimated that the<br />
share of renewable energy will reach 33% in 2020, up<br />
<strong>from</strong> around 20% in 2009. In other words, with this<br />
strategy, Denmark will exceed the EU target of a 30% RE<br />
share by 2020 by 3 percentage points.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
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On the way towards fossil fuel independence by <strong>2050</strong> <strong>–</strong> effects <strong>and</strong> benefits of the government’s initiatives<br />
%<br />
33<br />
30<br />
25<br />
20<br />
15<br />
Figure 4.6. Share of renewable energy in final energy consumption<br />
2006-2020. Source: Danish <strong>Energy</strong> Agency<br />
The significant expansion of renewable energy will<br />
ensure, that Denmark keeps its place as a global leader<br />
in raising its RE share. Up to 2020, consumption of biomass,<br />
wind, bio<strong>gas</strong> <strong>and</strong> biofuels will increase significantly<br />
as a consequence of existing <strong>and</strong> new initiatives. With a<br />
significant increase in solid biomass, bio<strong>gas</strong> as well as<br />
biofuels, bioenergy will continue to make up the majority<br />
of total renewable energy consumption in 2020, see<br />
figure 4.7.<br />
250<br />
0<br />
2000 2005 2010 2015 2020<br />
Other Wind Bio<strong>gas</strong> Biofuel Biomass<br />
Figure 4.7 Renewable energy in primary energy consumption<br />
2000-2020. Source: Danish <strong>Energy</strong> Agency<br />
50<br />
33% by 2020<br />
0<br />
2006 2008 2010 2012 2014 2016 2018 2020<br />
Without initiatives With new initiatives EU target<br />
200<br />
150<br />
100<br />
PJ<br />
50<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
It has been estimated that the RE share will continue to<br />
increase after 2020, depending on price developments,<br />
new initiatives etc. With the government initiatives for<br />
expansion of wind <strong>and</strong> biomass, Denmark is well on its<br />
way to having an energy <strong>and</strong> transport system based<br />
on renewable energy by <strong>2050</strong>. This is illustrated in figure<br />
4.8.<br />
100<br />
90<br />
80<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
33 % by 2020<br />
2010 2015 2020 2025 2030 2035 2040 2045 <strong>2050</strong><br />
Without initiatives With new initiatives<br />
Figure 4.8. RE-share 2010 to <strong>2050</strong><br />
Source: Danish <strong>Energy</strong> Agency<br />
%<br />
A lower energy consumption<br />
With the proposed initiatives, this strategy will help<br />
reduce gross energy consumption in 2020 by significantly<br />
more than expected, as it has been estimated,<br />
that gross energy consumption will be reduced by 6%<br />
by 2020, relative to 2006. Thus, the target of reducing<br />
gross energy consumption by 4% by 2020 compared to<br />
2006 will be more than met. This means, that Denmark<br />
is well on its way to meeting the government’s goal of<br />
being one of the three most energy-efficient countries in<br />
the world by 2020.
900<br />
875<br />
850<br />
825<br />
800<br />
775<br />
PJ<br />
0<br />
2006 2008 2010 2012 2014 2016 2018 2020<br />
Primary energy consumption<br />
Figure 4.9. Primary energy consumption 2006-2020<br />
Source: Danish <strong>Energy</strong> Agency<br />
Denmark is well on its way to meeting the gov-<br />
ernment’s goal of being one of the three most<br />
energy-efficient countries in the world by 2020.<br />
With new initiatives Without new initiatives<br />
2020 target for primary energy consumption<br />
Maintaining the high security<br />
of energy supply<br />
The government strategy will improve Denmark’s energy<br />
supply security in the short term as well as in the long<br />
term. Ever-lower gross energy consumption <strong>and</strong> reductions<br />
in imports of fuels will mean that Denmark will be<br />
less dependent on politically unstable regimes <strong>and</strong> will<br />
result in a greater robustness with regard to unstable energy<br />
prices <strong>and</strong> supply crises. Thereby, a higher degree<br />
of security of supply will be achieved than in a system<br />
with greater energy consumption <strong>and</strong> more dependence<br />
on imports of fuels.<br />
Paradoxically, an energy <strong>and</strong> transport system with<br />
greater electrification of end consumption, <strong>and</strong> therefore<br />
greater electricity consumption as a whole, is not<br />
significantly more vulnerable to physical breakdowns in<br />
the electricity system. This is because by far the greatest<br />
part of the extra electricity consumption is flexible <strong>and</strong><br />
will therefore not be affected by any brief failures in the<br />
electricity supply. On the other h<strong>and</strong>, maintaining the security<br />
of supply in an energy <strong>and</strong> transport system based<br />
on fluctuating energy sources such as wind requires a<br />
strong electricity infrastructure, more trade with foreign<br />
suppliers, a well functioning electricity market <strong>and</strong> backup<br />
capacity. It also requires storage facilities for electricity<br />
<strong>and</strong> heating.<br />
On the way to meeting climate<br />
objectives by 2020 <strong>and</strong> <strong>2050</strong><br />
Greenhouse <strong>gas</strong> emissions will be reduced in line with<br />
the phase out of fossil fuels. With the government initiatives,<br />
Denmark is well on the way to meeting the Danish<br />
climate commitment for the period 2013-2020, while at<br />
the same time setting a long-term course towards an<br />
economy with a very low climate impact.<br />
However, reducing greenhouse <strong>gas</strong> emissions poses a<br />
challenge that extends beyond the energy <strong>and</strong> transport<br />
sector. CO2 constitutes just under 80% of Denmark’s<br />
total greenhouse <strong>gas</strong> emissions. After CO2, the greatest<br />
contributors to Danish greenhouse <strong>gas</strong> emissions are<br />
nitrous oxide <strong>and</strong> methane, which primarily stem <strong>from</strong><br />
agriculture. However, emissions <strong>from</strong> waste <strong>and</strong> industrial<br />
processes also contribute to total greenhouse <strong>gas</strong><br />
emissions.<br />
1.4%<br />
8.7%<br />
10.5%<br />
79.4%<br />
F-<strong>gas</strong>es Methane Nitrous oxide CO2<br />
Figur. 4.10. Observed emissions by type of greenhouse<br />
<strong>gas</strong> in 2008. Source: National Environmental Research Institute (NERI)<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
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On the way towards fossil fuel independence by <strong>2050</strong> <strong>–</strong> effects <strong>and</strong> benefits of the government’s initiatives<br />
Reduction of non-ETS emissions<br />
Efforts to reduce greenhouse <strong>gas</strong> emissions are required<br />
in the short term if Denmark is to meet its commitments<br />
for 2020, i.e. to reduce non-ETS emissions by 20%<br />
by 2020 in relation to 2005. In 2008, non-ETS emissions<br />
made up approximately 58% of Denmark’s total<br />
emissions <strong>and</strong> included greenhouse <strong>gas</strong> emissions<br />
As part of the EU climate <strong>and</strong> energy package of 2008, a<br />
common EU target for the non-ETS sectors was set for<br />
a reduction of approximately 10% by 2020 in relation to<br />
2005. The common target has been divided into national<br />
reduction commitments. Denmark has committed itself<br />
to reducing non-ETS emissions by 20% by 2020 in relation<br />
to 2005. Denmark’s reduction commitment is one<br />
of the highest in the EU. In comparison, other member<br />
states have reduction commitments that lie between<br />
-20% <strong>and</strong> +20%, see Figure 4.11.<br />
In contrast to the commitment period 2008-2012, where<br />
the emissions average throughout the period may not<br />
exceed the commitment target, commitments for the<br />
period 2013-2020 are annual commitment targets. This<br />
means that member states must meet a fixed reduction<br />
target every year. Reduction targets follow an ever<br />
increasing linear path with a fixed increase <strong>from</strong> the<br />
start in 2013 until the final target is reached in 2020. In<br />
Denmark’s case this corresponds to 20 % reduction in<br />
relation to 2005. Thus a reduction path is created made<br />
up of annual sub-targets. Member states may exceed<br />
their commitment targets in the first years, so as to ‘save<br />
up’ for years to come.<br />
Figure 4.11 Burden sharing of the EU reduction commitment<br />
in non-ETS sectors by 2020 relative to 2005<br />
Box 4.1 Target for 20% reduction in non-ETS emissions by<br />
2020<br />
52<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
<strong>from</strong> transport, agriculture, households, waste <strong>and</strong> less<br />
significant parts of industry <strong>and</strong> the energy sector, e.g.<br />
small-scale CHP plants. ETS emissions primarily stem<br />
<strong>from</strong> electricity <strong>and</strong> heat production as well as energyintensive<br />
companies, <strong>and</strong> are regulated by the EU Emissions<br />
Trading Scheme.<br />
Portugal<br />
Slovenia<br />
Malta<br />
Czech Republic<br />
Hungary<br />
Estonia<br />
Slovakia<br />
Pol<strong>and</strong><br />
Lithuania<br />
Latvia<br />
Romania<br />
Bulgaria<br />
Denmark<br />
Irel<strong>and</strong><br />
Luxembourg<br />
Sweden<br />
Netherl<strong>and</strong>s<br />
Austria<br />
Finl<strong>and</strong><br />
United Kingdom<br />
Belgium<br />
Germany<br />
France<br />
Italy<br />
Spain<br />
Cyprus<br />
Greece<br />
-20 -15 -10 -5 0 5 10 15 20
Efforts for greenhouse <strong>gas</strong> reductions made until now<br />
have laid the foundation for compliance with the reduction<br />
commitment. A number of the government initiatives<br />
to reduce fossil fuel use will also lead to significant<br />
reductions in the non-ETS sectors. All in all, it has been<br />
estimated, that the government’s new initiatives will<br />
reduce non-ETS emissions by 4-5 million tonnes CO2<br />
equivalents in the period 2013-2020. The greatest effect<br />
will be achieved <strong>from</strong> enhanced efforts to improve energy<br />
efficiency. In addition, effects will also be achieved<br />
by conversion away <strong>from</strong> individual heating based on <strong>oil</strong><br />
<strong>and</strong> <strong>gas</strong>, a greater share of biofuels, an improved framework<br />
for using bio<strong>gas</strong> <strong>and</strong> free choice of fuel.<br />
This will allow for a flexible <strong>and</strong> dynamic choice of further<br />
climate initiatives in sectors such as agriculture, waste<br />
<strong>and</strong> transport. The government will follow up on efforts<br />
regularly to ensure compliance with the 2020 climate<br />
commitment, <strong>and</strong> launch new initiatives as required.<br />
Significant greenhouse <strong>gas</strong><br />
reductions in the long term<br />
The need for significant reductions with regard to total<br />
greenhouse <strong>gas</strong> emissions in the long term also requires<br />
that the right foundation is laid down early in the process.<br />
Thus short term efforts will contribute to steering<br />
Denmark in the right direction with regard to the common<br />
EU objective of an 80%-95% reduction by <strong>2050</strong><br />
relative to 1990. Even though the EU target cannot be<br />
translated into a Danish reduction commitment, it gives<br />
an impression of the challenge facing Denmark with<br />
regard to long term reductions.<br />
Total greenhouse <strong>gas</strong> emissions will be<br />
further reduced in line with the phase<br />
out of fossil fuels.<br />
Total greenhouse <strong>gas</strong> emissions will be further reduced<br />
in line with the phasing out of fossil fuels. Calculations<br />
made by the Danish Commission on Climate Change<br />
Policy show that when Denmark’s energy <strong>and</strong> transport<br />
systems no longer use fossil fuels, <strong>and</strong> therefore have<br />
more or less no carbon emissions, Denmark’s greenhouse<br />
<strong>gas</strong> emissions will be reduced by approximately<br />
75%. Thus Denmark will be able to contribute to meeting<br />
the EU objective, as well as the objective to limit the average<br />
temperature rise to 2°C, as agreed in Copenhagen<br />
in 2009 <strong>and</strong> in Cancún in 2010. However, cost-effective<br />
reduction of total emissions requires efforts to limit<br />
greenhouse <strong>gas</strong> emissions outside the energy sector,<br />
both CO2 <strong>and</strong> other greenhouse <strong>gas</strong>es, see figure 4.12.<br />
mill tonnes CO2 eq.<br />
80<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
1990 2008 2020 <strong>2050</strong><br />
Other Agricultural CO2 <strong>from</strong> fossil fuels<br />
Figure 4.12. Denmark’s greenhouse <strong>gas</strong> emissions in 1990,<br />
2008, 2020 <strong>and</strong> <strong>2050</strong> (adj. emissions, excluding carbon<br />
storage). Source: Danish <strong>Energy</strong> Agency/Danish Commission on Climate<br />
Change Policy (<strong>2050</strong>-scenario)<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
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On the way towards fossil fuel independence by <strong>2050</strong> <strong>–</strong> effects <strong>and</strong> benefits of the government’s initiatives<br />
A transition creating green growth<br />
Many other countries are facing the same challenge; to<br />
move their economies away <strong>from</strong> dependence on fossil<br />
fuels. This will lead to a growing global market for renewable<br />
energy technologies <strong>and</strong> energy-efficiency improvement<br />
solutions.<br />
The government has already launched a number of initiatives<br />
to support Denmark becoming an attractive place<br />
for research, development, demonstration <strong>and</strong> testing<br />
of energy technologies; for Danish as well as foreign<br />
companies. With the Erhvervsklimastrategien (climate<br />
strategy for companies), the government presented its<br />
vision to create a new green growth economy in Denmark.<br />
In connection with this, framework conditions for<br />
clean tech companies were strengthened by e.g. establishing<br />
Green Labs DK <strong>and</strong> the market maturity efforts<br />
of the Innovation Foundation. In overall terms, in 2010<br />
the government allocated more than DKK 1.5 billion<br />
for research, development, demonstration <strong>and</strong> market<br />
preparation of new green solutions. In addition to this,<br />
the government has initiated establishment of a national<br />
test centre for wind turbines in Østerild in the northwestern<br />
part of Jutl<strong>and</strong>. This test centre will meet the<br />
requirements of the wind turbine industry <strong>and</strong> research<br />
institutions for full-scale test facilities of the highest international<br />
st<strong>and</strong>ard.<br />
Initiatives with green growth potential<br />
In addition to energy <strong>and</strong> climate effects, the wide range<br />
of initiatives in <strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> will also support<br />
Denmark’s strong position as a laboratory for green<br />
technology research, development <strong>and</strong> demonstration,<br />
notably for energy technology.<br />
• With regard to wind power, opportunities for a close<br />
interplay between test, demonstration <strong>and</strong> production<br />
of wind turbines will be enhanced, equipping<br />
Danish companies to continue taking full advantage<br />
of the global expansion of wind power.<br />
• With regard to biomass <strong>and</strong> biofuels, increased use<br />
in combined heat <strong>and</strong> power production <strong>and</strong> transport<br />
will improve Danish companies’ opportunities<br />
for development <strong>and</strong> innovation in a promising area<br />
in which Denmark has already demonstrated core<br />
competences.<br />
54<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
• With regard to bio<strong>gas</strong>, improved framework conditions<br />
will underpin Danish skills <strong>and</strong> strengthen the<br />
role of agriculture as a green energy supplier.<br />
• With regard to smart grids <strong>and</strong> electricity transmission,<br />
these will be exp<strong>and</strong>ed, <strong>and</strong> there will be greater<br />
integration of renewable energy into the electricity<br />
system; all areas in which Danish companies already<br />
have a strong position.<br />
• Last but not least, with regard to energy saving<br />
efforts, these will place Danish companies at the<br />
forefront of developments within energy efficiency<br />
solutions; solutions which will be in high dem<strong>and</strong> by<br />
other countries. In addition, jobs will be created in the<br />
building <strong>and</strong> construction sector.<br />
Research, development, demonstration <strong>and</strong> preparation<br />
for market will also in future be pivotal <strong>and</strong> contribute to<br />
continued innovation <strong>and</strong> testing of Danish energy technology.<br />
The government initiatives aim at stronger focus<br />
<strong>and</strong> coordination of allocations for energy technology research,<br />
development <strong>and</strong> demonstration. Moreover, the<br />
Danish government will enter into partnerships with the<br />
business community to strengthen coordination of private<br />
<strong>and</strong> public efforts in the areas above, for example.<br />
The government will also increase its focus on providing<br />
Danish <strong>and</strong> foreign cleantech companies in Denmark<br />
with access to highly qualified labour <strong>and</strong> research communities<br />
with skills in green energy.<br />
Government initiatives will strengthen cohesion between<br />
development, testing, production <strong>and</strong> sale of new technology,<br />
<strong>and</strong> thereby strengthen companies’ opportunities<br />
for innovation <strong>and</strong> demonstration of new green solutions.<br />
Thus this strategy provides Danish companies with<br />
a good launch pad for exporting to a rapidly growing<br />
global market.<br />
Under the auspices of the EU, the Danish government<br />
is pushing to promote CO2 reductions, energy savings<br />
<strong>and</strong> the use of renewable energy across member<br />
states. These efforts are contributing to securing sales<br />
of efficient <strong>and</strong> renewable energy technologies within the<br />
EU <strong>and</strong> to ensuring fair competition, which will benefit<br />
Danish companies.
Thus this strategy provides Danish companies<br />
with a good launch pad for exporting to a<br />
rapidly growing global market.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
55
5A<br />
A fully financed transition<br />
fully financed transition<br />
56<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
An economically responsible transition<br />
is important for the Danish government.<br />
Therefore all the new initiatives in the<br />
government’s strategy are fully financed.
The transition to fossil fuel independence will not be free.<br />
It will cost money to convert to more energy efficient<br />
technology <strong>and</strong> renewable energy. It will require investment<br />
which in the long term will mean lower fuel costs,<br />
but which in the short term will often be more expensive<br />
than the fossil alternatives. In the longer term, transition<br />
will result in an economy less vulnerable to fluctuating<br />
energy prices, <strong>and</strong> Denmark will make its contribution to<br />
meeting the costs arising <strong>from</strong> extensive global climate<br />
change. If these benefits are taken into consideration,<br />
the extra costs of the transition to a society without fossil<br />
fuels will overall be modest, although transition will have<br />
to be gradual <strong>and</strong> over a long time period.<br />
An economically responsible transition is important for<br />
the Danish government. Therefore all the new initiatives<br />
in the government’s strategy are fully financed. Furthermore<br />
the financing has been designed with full respect<br />
for existing economic policies <strong>and</strong> in a way, which retains<br />
the overall competitiveness <strong>and</strong> employment of Danish<br />
companies, <strong>and</strong> which provides new opportunities for<br />
green growth.<br />
The transition to fossil fuel independence<br />
will not be free.<br />
In line with the phasing out of fossil fuels, government<br />
revenues <strong>from</strong> taxes on fossil fuels will naturally fall as<br />
well. This means that the government’s revenue base will<br />
deteriorate with an unchanged tax system. This in turn<br />
means that there will be a need to gradually introduce<br />
taxes on other energy sources to ensure government<br />
revenues, <strong>and</strong> thus the basis for continued welfare.<br />
Together with continued taxes on fossil fuels, transition<br />
can be financed while also ensuring the right incentives<br />
to reduce the use of fossil fuels.<br />
In any case, changes in the existing tax system will have<br />
to take full account of the competitiveness of Danish<br />
businesses <strong>and</strong> the finances of individual households.<br />
There is no benefit in conducting energy <strong>and</strong> climate<br />
policy at the cost of Danish businesses <strong>and</strong> Danish jobs.<br />
However, neither is it possible to exempt the business<br />
community entirely <strong>from</strong> the burden of transition to fossil<br />
fuel independence. The government’s strategy has<br />
established a balance between competitiveness <strong>and</strong> the<br />
need for a fair distribution of the burden of transition.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
57
A fully financed transition<br />
Figure 5.1 Financing the government’s proposal<br />
A fully financed package of initiatives<br />
The government’s new climate <strong>and</strong> energy policy<br />
initiatives up to 2020 are fully financed. This also applies<br />
to tax revenue losses resulting <strong>from</strong> lower energy<br />
consumption <strong>and</strong> in particular lower consumption of<br />
fossil fuels. This implies, that the transition to fossil fuel<br />
independence will primarily be financed by the energy<br />
consumers, who will also reap advantages in the form of<br />
lower fuel costs <strong>and</strong> better security of supply.<br />
58<br />
Increased energy efficiency in<br />
buildings <strong>and</strong> businesses<br />
Estimated at<br />
DKK 0.6 billion in 2020<br />
New initiatives for renewable<br />
energy expansion<br />
Estimated at<br />
DKK 1.4 billion in 2020<br />
State revenue losses due<br />
to reduced consumption<br />
of fossil fuels<br />
Estimated at<br />
DKK 1.6 billion in 2020<br />
Other new initiatives<br />
Estimated at DKK 0.2 billion<br />
over the period 2011-2014<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
Financed through energy company<br />
tariffs <strong>and</strong> thus by energy consumers<br />
(electricity, heating, <strong>oil</strong>, <strong>gas</strong>).<br />
Financed primarily through the Public<br />
Service Obligation (PSO), which is charged<br />
over the electricity bill. In addition, a new<br />
<strong>gas</strong> PSO scheme will be introduced<br />
<strong>and</strong> charged over the <strong>gas</strong> bill.<br />
Financed through the introduction of a<br />
security of supply tax which will contribute<br />
to a revenue-neutral green transition.<br />
Financed by re-allocating existing funds<br />
in the energy <strong>and</strong> climate budget,<br />
including remaining funds <strong>from</strong> the existing<br />
scheme for scrapping <strong>oil</strong> furnaces.<br />
Financing energy saving initiatives through grid<br />
tariffs <strong>and</strong> energy consumers<br />
The costs of energy companies relating to energy saving<br />
initiatives are covered through the companies’ grid<br />
tariffs, <strong>and</strong> thus ultimately paid by energy consumers.<br />
The grid tariffs are subject to financial regulation set in<br />
advance. The regulation is implemented by executive order<br />
following political negotiations. If the increases in the<br />
obligations are distributed proportionately on the basis<br />
of current consumption, the higher costs will be more or<br />
less equally distributed between electricity consumers,<br />
district heating consumers <strong>and</strong> <strong>oil</strong> <strong>and</strong> <strong>gas</strong> customers.
An important tool to achieve more efficient<br />
buildings <strong>and</strong> businesses is to increase the<br />
energy saving obligations<br />
Most of the funds charged by energy companies to energy<br />
consumers in 2020 to meet the savings obligations<br />
will be used as subsidies for companies <strong>and</strong> households<br />
to buy energy efficient equipment <strong>and</strong> energy consultancy.<br />
The costs of energy saving efforts will therefore to<br />
a large extent be recouped through falling energy consumption<br />
<strong>and</strong> thus lower energy costs for consumers.<br />
Financing renewable energy expansion through<br />
the PSO scheme<br />
Government initiatives to exp<strong>and</strong> renewable energy<br />
up to 2020 include an offshore wind farm at Kriegers<br />
Flak, coastal wind turbines <strong>and</strong> onshore wind turbines,<br />
biomass in electricity <strong>and</strong> heat production, as well as<br />
bio<strong>gas</strong>. These initiatives are financed through the PSO<br />
scheme (Public Service Obligation). The PSO contribution<br />
is a supplement to the price of electricity which,<br />
in addition to exp<strong>and</strong>ing renewable energy, finances<br />
subsidies for small-scale CHP plants, electricity-related<br />
6000<br />
5000<br />
4000<br />
3000<br />
2000<br />
1000<br />
DKK million<br />
0<br />
-1000<br />
research, development <strong>and</strong> demonstration, as well as<br />
other common costs of the electricity system. The PSO<br />
contribution is paid by all electricity consumers through<br />
their electricity bills, although there is an upper limit.<br />
As a new element, a small proportion of the PSO costs<br />
will be covered by <strong>gas</strong> consumers. This will finance the<br />
costs of replacing some of the natural <strong>gas</strong> in the grid<br />
with bio<strong>gas</strong>. Gas consumers are expected to have to<br />
pay DKK 0.2 billion of the total PSO costs in 2020. In<br />
addition to this, some of the expansion of bio<strong>gas</strong> will be<br />
financed through the security of supply tax.<br />
With these government initiatives, PSO costs will gradually<br />
increase up to 2020, when additional PSO costs will<br />
amount to DKK 1.4 billion <strong>and</strong> the total PSO payments<br />
will therefore amount to almost DKK 4.5 billion (2011<br />
prices).<br />
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020<br />
Basis Onshore wind Near-shore turbines Bio<strong>gas</strong> in the <strong>gas</strong> grid Heating settlement Kriegers Flak Bio<strong>gas</strong> changes<br />
Figure 5.2 PSO costs 2002-2020 (2011 prices)<br />
Note: the negative contribution to PSO costs <strong>from</strong> the<br />
new bio<strong>gas</strong> initiatives is because some of the subsidies for<br />
bio<strong>gas</strong> will in future be granted outside the PSO system.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
59
A fully financed transition<br />
Since the introduction of the scheme in the late 1990s,<br />
the PSO payment has fluctuated as a result of varying<br />
market prices for electricity, which affect the need for<br />
support for renewable energy; varying rates of renewable<br />
energy expansion; <strong>and</strong> changes in RE subsidy rates.<br />
Even with significant expansion of renewable energy<br />
towards 2020, both as a result of the government’s new<br />
initiatives <strong>and</strong> policies already implemented, the total<br />
PSO payment will not reach more than the level in 2002-<br />
2004 (at fixed prices). The reason it is possible to finance<br />
more renewable energy without the total PSO payment<br />
increasing to record levels is that the need for support<br />
for renewable energy per unit is falling <strong>and</strong> that previous<br />
support is falling away. In other words there will be more<br />
<strong>and</strong> more renewable energy for the same cost.<br />
Financing lost state revenue through a security of<br />
supply tax<br />
As the consumption of fossil fuels drops as a consequence<br />
of energy-efficiency improvements <strong>and</strong> more<br />
renewable energy, state revenues <strong>from</strong> taxes on <strong>coal</strong>,<br />
<strong>oil</strong> <strong>and</strong> <strong>gas</strong> will also drop. Revenue losses will increase<br />
gradually in line with the phase-out of fossil fuels <strong>and</strong><br />
will amount to approximately DKK 1.6 billion in 2020. In<br />
order to finance this loss in revenues, the government<br />
will introduce a security of supply tax which, mirroring<br />
revenue losses, will gradually raise energy taxes on all<br />
fuels for space heating, i.e. <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> as well as<br />
biomass. It is estimated that a security of supply tax of<br />
approximately DKK 17 per GJ in 2020 will secure neutral<br />
government finances <strong>and</strong> therefore this figure has been<br />
used in the following calculations. The exact tax rates<br />
<strong>and</strong> phase-in will be finally determined in connection with<br />
the specific implementation in future legislation.<br />
In order to relieve the burden of the security of supply<br />
tax for consumers already paying high taxes on fossil<br />
fuels, the tax increase on fossil fuels already taxed will be<br />
reduced by approximately DKK 7.5 per GJ in 2020. This<br />
60<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
adjustment will also establish a better balance between<br />
taxation of fossil fuels <strong>and</strong> taxation of biomass, which the<br />
Tax Commission proposed <strong>and</strong> which the Commission<br />
on Climate Policy Change also suggested. The security<br />
of supply tax will provide revenues of approximately DKK<br />
2.0 billion in 2020.<br />
Furthermore, taxes on electricity <strong>and</strong> fossil fuels used for<br />
industry will be reduced by approximately DKK 3-3.5 per<br />
GJ in 2020 compared with what was otherwise planned<br />
in the Spring Package 2.0 in order to relieve the tax<br />
burden for the business community by DKK 0.4 billion in<br />
2020 for reasons of competitiveness. This means total<br />
revenues will amount to approximately DKK 1.6 billion in<br />
2020, ensuring that overall the government’s proposal is<br />
neutral in terms of total government revenues.<br />
2500<br />
2000<br />
1500<br />
1000<br />
500<br />
DKK million, �xed prices<br />
0<br />
-500<br />
2012 2013 2014 2015 2016 2017 2018 2019 2020<br />
Security of supply tax (incl. lower tax on fuels already taxed)<br />
Lower energy tax on process energy<br />
Total tax revenues to cover revenue losses<br />
Figure 5.3 Tax revenues <strong>from</strong> the security of supply tax<br />
2012-2020 (2011 prices)
The goal of fossil fuel independence will increase<br />
pressure on public budgets gradually up to <strong>2050</strong> as a<br />
consequence of tax revenues lost by reduced use of<br />
fossil fuels. In order to support the objective of fossil fuel<br />
independence, it is necessary to amend the environmental<br />
clause of the government’s tax freeze, so that the<br />
guidelines for the tax freeze are exp<strong>and</strong>ed as follows:<br />
Box 5.1. Relationship with the government’s tax freeze<br />
The proposed security of supply tax, combined with<br />
the tax relief for energy use for industrial processes will<br />
especially affect households, but it is also important to<br />
consider a number of benefits for heating consumers<br />
<strong>from</strong> the other initiatives in the government proposal.<br />
The proposed changes in heating settlement <strong>and</strong> the<br />
free choice of fuel means better access to lower taxed<br />
fuels such as biomass <strong>and</strong> bio<strong>gas</strong> <strong>and</strong> therefore lower<br />
heating bills for a large number of consumers. Efforts for<br />
energy savings will also be intensified with corresponding<br />
benefits for consumers. From an overall perspective<br />
therefore regulation will be adapted on market terms to<br />
the benefit of consumers. This is then financed through<br />
a security of supply tax, which adjusts taxes on fuel used<br />
in heat production.<br />
The security of supply tax in itself also provides an incentive<br />
for more efficient energy consumption for heating<br />
<strong>–</strong> for example to insulate housing better <strong>and</strong> to install<br />
heat pumps instead of <strong>gas</strong> furnaces when replacing old<br />
installations.<br />
The strategy includes a large number of<br />
smaller initiatives to support <strong>and</strong> prepare<br />
for the transition to fossil fuel independence<br />
“The government’s objective is that Denmark is to be<br />
independent of fossil fuels. This has the effect, that fossil<br />
fuels that are highly taxed will be replaced by other, more<br />
environmentally friendly types of energy taxed at a lower<br />
rate <strong>and</strong> in some cases tax exempt. In order to counteract<br />
this detrimental effect on tax revenues, other energy taxes<br />
may be increased, provided the overall tax burden is not<br />
increased.”<br />
Financing new energy policy initiatives through<br />
reprioritisation<br />
The strategy includes a large number of smaller initiatives<br />
to support <strong>and</strong> prepare for the transition to fossil fuel<br />
independence. There are very specific initiatives such<br />
as demonstration projects <strong>and</strong> subsidy pools for smaller<br />
renewable energy technologies. There are also broader<br />
initiatives to establish the right framework for the future<br />
transition. In total these initiatives will cost DKK 0.2 billion<br />
for the period 2011-2014.<br />
Of course the initiatives require that financing is in place.<br />
It is proposed that the initiatives be financed by non-utilised<br />
funds <strong>from</strong> the <strong>oil</strong> furnace scrapping scheme, which<br />
was decided in connection with the Central Government<br />
Budget for 2010. It has been assessed that it is possible<br />
to reallocate these funds partly because the scheme has<br />
not seen the expected dem<strong>and</strong> <strong>and</strong> partly because it<br />
has been estimated that it is still financially viable to convert<br />
to other types of heating, even without government<br />
subsidies. The full return on investment of for example<br />
installing a heat pump instead of an <strong>oil</strong>-fired furnace<br />
when replacement is due is typically of 5-10 years.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
61
A fully financed transition<br />
Micro economic effects of the transition<br />
The transition towards fossil fuel independence will<br />
strengthen growth opportunities considerably for Danish<br />
energy <strong>and</strong> climate companies. However, it is crucial for<br />
the government that the transition to fossil fuel independence<br />
takes account of the competitiveness of all<br />
Danish companies.<br />
Considered in isolation, financing the government’s new<br />
initiatives will incur additional costs for private businesses,<br />
growing gradually to DKK 1.2 billion in 2020. This<br />
represents approximately DKK 600 per employee or approximately<br />
0.1% of the gross added value in the entire<br />
private sector. In the longer term, it has been estimated<br />
that the burden will fall, in part as a result of falling costs<br />
of supporting RE production. Table 5.1 shows specifically<br />
what the initiatives will mean for energy costs for<br />
a medium-sized service company <strong>and</strong> a large energyintensive<br />
manufacturing company.<br />
The calculations have been made on the basis of fuel<br />
<strong>and</strong> tax assumptions for 2020; the year in which additional<br />
costs are estimated to be highest. The increase will<br />
take place gradually up to 2020. Companies therefore<br />
have good opportunities to adapt to the new conditions.<br />
For most of the business community, exemplified here<br />
by a medium-sized service company, this will involve<br />
modest additional costs <strong>and</strong> will not affect the competitiveness<br />
of companies. However, increases in PSO<br />
Fully implemented<br />
in 2020<br />
Medium-sized<br />
VAT-registered enterprise<br />
(About 250 employees)<br />
Large industrial enterprise<br />
in energy-intensive sector<br />
(About 400 employees)<br />
62<br />
Total energy<br />
expenditure<br />
without proposal<br />
Table 1: Examples of increases in energy costs in 2020 with the strategy in place<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
Expenditure in<br />
connection with<br />
proposal without<br />
reduction of<br />
energy taxes<br />
contributions <strong>and</strong> taxes could impact competitiveness<br />
for a number of energy-intensive companies.<br />
Therefore, the government proposes that energy taxes<br />
on energy for industry be relaxed by DKK 0.4 billion, so<br />
that the whole business community escapes additional<br />
costs as a consequence of tax increases. However,<br />
companies will still contribute to renewable energy expansion<br />
<strong>and</strong> further energy efficiency efforts by paying a<br />
PSO contribution <strong>and</strong> a grid tariff. For a large, energy-intensive<br />
company, this will mean, that additional costs are<br />
reduced to approximately 1.3% of the company’s energy<br />
costs in 2020. This will ensure the right balance between<br />
competitiveness <strong>and</strong> the need for a fair distribution of the<br />
transition costs.<br />
Furthermore, the government will direct half of the increase<br />
in energy companies’ energy saving obligation towards<br />
production companies, for example as subsidies<br />
to purchase energy-efficient equipment etc. Enhanced<br />
energy saving efforts could be a competitive advantage<br />
for energy-efficient companies in periods of increasing<br />
energy prices.<br />
With regard to conversion to more biomass in electricity<br />
<strong>and</strong> heat production, it is still possible to differentiate the<br />
price of heating <strong>and</strong> in so doing take account of business<br />
customers. The government presupposes, that<br />
producers <strong>and</strong> buyers agree heating prices which are<br />
not unnecessarily detrimental to the competitiveness of<br />
businesses.<br />
Expenditure in<br />
connection with<br />
proposal with<br />
reduction of<br />
energy taxes<br />
Change in<br />
relation to a<br />
situation without<br />
the proposal<br />
DKK 0.65 mill. DKK 0.69 mill DKK 0.69 mill. +5,5 pct.<br />
DKK 100.0 mill. DKK 104.0 mill. DKK 101.3 mill +1,3 pct.
A stable energy costs framework for<br />
Danish households<br />
The government’s new energy policy initiatives, <strong>and</strong> the<br />
financing of these, affect households in two ways. Firstly,<br />
energy saving efforts will be enhanced <strong>and</strong> there are<br />
a number of initiatives to promote conversion; initially<br />
away <strong>from</strong> <strong>oil</strong>, <strong>and</strong> later away <strong>from</strong> natural <strong>gas</strong>. This will<br />
require investment, but it will also reduce heating costs.<br />
Secondly, households will have to contribute to financing<br />
the green transition through slightly higher electricity <strong>and</strong><br />
heating bills.<br />
Under all circumstances energy costs will increase as a<br />
result of amongst others the growth in <strong>oil</strong> prices on the<br />
world market. However, the new initiatives in the strategy<br />
mean that households will have to pay slightly more for<br />
the energy they use because of the gradually increasing<br />
taxes on energy for heating, gradually increasing PSO<br />
costs for renewable energy as well as gradually increasing<br />
grid tariffs as a result of enhanced savings efforts.<br />
The government’s strategy has been planned so as to<br />
ensure that households’ total bills for electricity, heating<br />
<strong>and</strong> transport develop reasonably over the next few<br />
years. Increases in taxes <strong>and</strong> tariffs will be gradual. This<br />
means, that households will be able to react, for example<br />
by fitting additional insulation, replacing windows,<br />
converting to other types of heating or by buying more<br />
energy-efficient appliances when they need replacing.<br />
Costs of households for<br />
heating <strong>and</strong> electricity<br />
Considered in isolation, households’ expenditure on<br />
heating will increase, although modestly, as a result of<br />
the gradual phase-in of the security of supply tax on<br />
fuel for heating. By far the majority of households will<br />
have several options to maintain their heating bill at an<br />
unchanged level, <strong>and</strong> in some cases even reduce it; with<br />
the additional benefit of simultaneously reducing consumption<br />
of fossil fuels.<br />
By far the majority of households will have<br />
several options to maintain their heating bill<br />
at an unchanged level<br />
All else being equal, a detached house heated by <strong>oil</strong>,<br />
natural <strong>gas</strong> or district heating based on CHP will have<br />
increased heating costs in 2020 of approximately DKK<br />
900, corresponding to 4-5% compared with the current<br />
cost. Similarly, all else being equal, houses heated<br />
by wood pellets will have almost double the increase,<br />
although this will still be a financially attractive type of<br />
heating.<br />
<strong>Energy</strong> consumption for heating could in many cases be<br />
reduced cost effectively in connection with renovation,<br />
replacement <strong>and</strong> purchase of new equipment. Enhanced<br />
efforts to promote energy savings are therefore expected<br />
to result in the average household using 5% less energy<br />
for heating in 2020 than it would otherwise have done.<br />
At the same time, worn out <strong>oil</strong> furnaces can be replaced<br />
with heat pumps, <strong>and</strong> this reduces heating bills<br />
considerably more than replacement with a new <strong>oil</strong><br />
furnace. Natural <strong>gas</strong> installations will also benefit <strong>from</strong><br />
replacement with heat pumps in many cases. In smaller<br />
district heating areas, introduction of free choice of fuel<br />
provides an opportunity to convert to biomass-based<br />
district heating, <strong>and</strong> this can reduce the price of heating<br />
because of lower taxation on biomass. In large district<br />
heating areas, amended regulation can reduce the price<br />
of heating because there is an incentive to increase the<br />
use of biomass, in that producers <strong>and</strong> buyers obtain<br />
freedom of contract in setting the price of heating, <strong>and</strong><br />
thereby share the advantages of lower taxes when using<br />
biomass.<br />
In 2020, the strategy will lead to an increase in the price<br />
of electricity of approximately DKK 0.06 per kWh, including<br />
VAT, corresponding to an increase of approximately<br />
3% compared with an expected price of electricity in<br />
2020 of approximately DKK 2.15 per kWh, including<br />
taxes. For an average detached house with an annual<br />
electricity consumption of 4,000kWh, this corresponds<br />
to additional costs of DKK 250 including VAT per year in<br />
2020.<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
63
A En fully fuldt financed finansieret transition og erhvervsvenlig omstilling<br />
The example is based on two families. Both families live<br />
in a detached house of 150 m2, with average insulation,<br />
<strong>and</strong> with an annual electricity consumption for light, appliances<br />
a.o. of 4,000kWh.<br />
For both families, the new taxes <strong>and</strong> tariffs involve a<br />
gradual increase in energy bills up to 2020, when the<br />
<strong>Energy</strong> bill<br />
(electricity <strong>and</strong> heating),<br />
DKK per annum, VAT incl.<br />
House heated<br />
by <strong>oil</strong><br />
House heated<br />
by district<br />
heating <strong>from</strong><br />
natural-<strong>gas</strong>-fired<br />
CHP plant<br />
*after amortisation of additional investment for energy improvements<br />
** after amortisation of additional costs of a heat pump<br />
The family with the <strong>oil</strong> furnace can save approximately<br />
DKK 700 per year on energy consumption, if it at the<br />
same time reduces heat consumption by 5% through<br />
energy improvements when replacing old windows,<br />
roofing, etc. (after amortisation of additional investment<br />
for energy improvements). If, when it is worn out, the<br />
<strong>oil</strong> furnace is replaced with a heat pump, the family can<br />
save additionally DKK 7,300 per annum (after amortisation<br />
of the additional expense for a heat pump).<br />
Box 5.2 Economic consequences for two families in 2020 with the proposal<br />
64<br />
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
increase will be greatest. In 2020, the increase will<br />
amount to approximately DKK 1,150 including VAT per<br />
year, compared with a situation without this strategy. Of<br />
this, support for renewable energy <strong>and</strong> energy savings<br />
amounts to about DKK 250, whereas the remaining<br />
amount is attributable to the new security of supply tax<br />
on heating.<br />
2010 2020<br />
Without<br />
proposal<br />
With<br />
proposal<br />
With proposal<br />
<strong>and</strong> savings*<br />
With proposal<br />
<strong>and</strong> heat pump**<br />
Heating 17.300 20.900 21.800 21.100 13.800<br />
Electricity<br />
consumption<br />
7.900 8.650 8.900 8.900 8.900<br />
Total 25.200 29.550 30.700 30.000 22.700<br />
With proposal<br />
<strong>and</strong> conversion<br />
to biomass<br />
Heating 16.800 16.800 17.700 17.200 15.200<br />
Electricity<br />
consumption<br />
7.900 8.650 8.900 8.900 8.900<br />
Total 24.700 25.450 26.600 26.100 24.100<br />
The family with district heating can save approximately<br />
DKK 500 per annum on energy consumption by reducing<br />
its heating consumption by 5% (after amortisation<br />
of the additional investment on energy improvements).<br />
If the district heating plant converts production <strong>from</strong><br />
natural <strong>gas</strong> to biomass, expenses for heating may be<br />
reduced by a further DKK 2,000.
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong> <strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy.<br />
65
<strong>Energy</strong> <strong>Strategy</strong> <strong>2050</strong><br />
<strong>–</strong> <strong>from</strong> <strong>coal</strong>, <strong>oil</strong> <strong>and</strong> <strong>gas</strong> to green energy<br />
February 2011:7<br />
For information about this publication, please contact:<br />
The Danish Ministry of Climate <strong>and</strong> <strong>Energy</strong><br />
Stormgade 2-6<br />
1470 Copenhagen K<br />
Denmark<br />
Telephone: +45 3392 2800<br />
Email: kemin@kemin.dk<br />
www.kemin.dk<br />
ISBN printed publication<br />
978-87-92727-13-8<br />
ISBN electronic publication<br />
978-87-92727-14-5<br />
Cover: BGRAPHIC<br />
Layout/illustrations: Solid Media Solutions<br />
Print: Litotryk København A/S<br />
Number printed: 500 copies<br />
This publication can be downloaded<br />
<strong>and</strong> ordered on www.ens.dk<br />
<strong>and</strong> via www.kemin.dk